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ANNEXUREB 



DRAKENSTEIN 

MUNISIPALITEIT• MUNICIPALITY* UMASIPALA 
Paarl | Wellington | Gouda | Saron | Simondium 


Budget Related Policies 
2019/2020 


www.drakenstein.gov.za 


A city of excellence 





INDEX 




PAGE 

AMENDED 

1 

Long-Term Financial Sustainability Policy 

1 

2 

Borrowing Policy 

19 

3 

Cash & Investment Policy 

31 

4 

Unauthorised, Irregular, Fruitless- and Wasteful Expenditure Policy 

51 

5 

Supply Chain Management Policy 

66 

6 

Travelling & Subsistence Policy 

138 

7 

Customer Care, Credit Control, Debt Collection and Indigent Support Policy 

162 

8 

Tariff Policy 

209 

9 

Property Rates Policy 

230 

10 

Asset Transfer Policy 

273 

11 

Funding and Reserves Policy 

305 

12 

Electrical Infrastructure Maintenance Policy 

318 

13 

Gift Policy 

337 

14 

Stock Management Policy 

345 

REVIEWED NO CHANGES 

15 

Unclaimed Deposits Policy 

16 

Accounting Policy 

17 

Prioritisation Model for Capital Assets Investment 

18 

Virement Policy 

19 

Asset Management Policy 

20 

Financial Asset Management Policy 

21 

Insurance Policy 

22 

Petty Cash Policy 

23 

Writing-Off of Irrecoverable Debt Policy 

24 

Budget and Management Oversight Policy 

25 

Grants in Aid Policy 

26 

Development Charges Policy (Previously Developer Contributions Policy) 

27 

Water Losses Policy 

28 

Electricity Losses Policy 

29 

Public Participation Policy 

30 

Infrastructure Procurement & Delivery Management 














































































DRAKENSTEIN 

MUNISIPALITEIT • MUNICIPALITY • UMASIPALA 
Paarl | Wellington | Gouda I Saron | Simondium 


LongTerm Financial 
Sustainability Policy 


www.drakenstein.gov.za 


A city of excellence 





Table of Contents 


1. Introduction.3 

2. Financial Sustainability and South African Legislation.3 

3. Financial Sustainability-The Concept.5 

4. Financial Sustainability in Local Government.5 

5. Defining Financial Sustainability.6 

6. Signalling and Communicating Long-Term Financial Sustainability.7 

7. Long-Term Financial Sustainability Ratios.9 

7.1 Indicator 1: Operating Surplus Ratio.9 

7.2 Indicator 2: Net Financial Liabilities Ratio.13 

7.3 Indicator 3: Asset Sustainability Ratio.16 

8. Acknowledgements.18 


Long Term Financial Sustainability Policy - 

2 
















1. Introduction 


1.1 Drakenstein Municipality is responsible for directly providing residents in its jurisdictional area, a 
wide range of public services, and access to essential utilities and community facilities. This 
requires Drakenstein to hold and maintain a significant base of infrastructure assets, which 
necessitates not only substantial initial investments, but also continued expenditure to maintain 
and renew assets over the course of their respective useful lives. 

1.2 It is paramount that long-term financial and asset management planning is undertaken to ensure 
local governments can continue to provide the desired levels of services to residents now and into 
the future, within the confines of their respective financial capacities. 

2. Financial Sustainability and South African Legislation 


2.1 Section 26(h) of the Municipal Systems Act (MSA) determines that an Integrated Development 
Plan (IDP) must reflect a financial plan, which must include a budget projection for at least the 

next three years. 

2.2 Regulation 2(3) of the Municipal Planning and Performance Management Regulations (MPPMR) 
determines that a financial plan reflected in a municipality's IDP must at least - 

(a) Includethe budget projection required bysection 26(h) ofthe MSA; 

(b) Indicate the financial resources that are available for capital project developments and 
operational expenditure; and 

(c) Include a financial strategy that defines sound financial management and expenditure 
control, as well as ways and means of increasing revenues and external funding for the 
municipality and its development priorities and objectives, which strategy may address the 
following - 

(i) Revenue raising strategies; 

(ii) Asset management strategies; 

(iii) Financial management strategies; 

(iv) Capital financing strategies; 

(v) Operational financing strategies; and 


Long Term Financial Sustainability Policy 


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(vi) Strategies that would enhance cost-effectiveness. 


2.3 Section 4(2)(d) of the MSA determines that the council of a municipality, within the municipality's 
financial and administrative capacity and having regard to practical consideration, has the duty to 
strive to ensure that municipal services are provided to the local community in a financially and 
environmentally sustainable manner. 

2.4 "Financially sustainable" in terms of section 1 of the MSA, in relation to the provision of a 
municipal service, means the provision of a municipal service in a manner aimed at ensuring that 
the financing of that service from internal and external sources, included budgeted income, grants 
and subsidies for the service, is sufficient to cover the costs of - 

(a) The initial capital expenditure required for the service; 

(b) Operating the service; and 

(c) Maintaining, repairing and replacing the physical assets used in the provision of the 
service. 

2.5 Foot note 1 to regulation 7(1) of the Municipal Budget and Reporting Regulations determines as 
follows: As defined in section l(g) of the Municipal Finance Management Act, policies that affect 
or are affected by the annual budget of a municipality include a policy related to the long-term 
financial plan. 

2.6 Notable shortcomings in South African legislation are - 

(a) Section 26(h) of the MSAthat refers to an IDP with information for only the next five years 
(medium-term thinking); 

(b) Section 26(h) of the MSA refers to a financial plan with budget projections for only three 
years (medium-term thinking); 

(c) Regulation 2(3)(c) of the MPPMR refers to a financial strategy that may address strategies 
with regard to revenue raising, asset management, financial management, capital 
financing, operational financing and strategies that would enhance cost-effectiveness 
(short-term thinking); 

(d) Section 4(2)(d) of the MSA refers to financially and environmentally sustainable municipal 
services (long-term thinking); 


Long Term Financial Sustainability Policy 


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(e) Section 1 of the MSA defines financially sustainable inter alia as maintaining, repairing 
and replacing physical assets in the provision of municipal services (long-term thinking); 
and 

(f) Foot note 1 to regulation 7(1) of the MBRR refers to a long-term financial plan (long-term 
thinking). 

2.7 There is no long-term financial plan template / guideline available or legislated. The same applies 
for financial strategies that may be developed. The financial plans of municipalities differ 
substantially from one another and there is no consistency for the reader of IDP's. 

3. Financial Sustainability - The Concept 


3.1 The word "sustainable" has gained common usage in a variety of areas since the 1990's. It is most 
often used in the context of environmental management. We can easily understand, for example, 
that fossil fuels such as oil and coal are finite resources. Therefore, considerable effort is devoted 
to seeking alternative renewable energy resources, along with energy-saving practices and 
technologies, to try to make our energy consumption practices sustainable. In general terms we 
use "sustainable" to mean that we can continue our current practices. 

3.2 "Financial sustainability" is a similar concept. For community members, financial sustainability is 
probably thought of as whether we can afford our current lifestyle: whether we can pay for rent, 
food and other expenses with the income we receive each year. For those of us who own homes, 
farms or businesses, we may think in longer terms as to whether we will be in a position to repay 
debts by the time we retire. This type of thinking is practical for individuals or families where long- 
term planning is probably in the order of 15 to 20 years. Flowever, most of us probably plan on a 
shorter basis than that. 

4. Financial Sustainability in Local Government 


4.1 The concepts most people use in their personal and business lives are basically the same as those 
that should be applied in municipalities, but need some modification. This is because municipal 
councils are perpetual corporations which acquire and manage a stock of financial and physical 
assets (including renewing and disposing of individual items) in order to provide services for 
generation after generation of local residents and ratepayers. 

4.2 Municipal councils provide the legal framework by which communities own infrastructure and 
other assets and by which they act as a collective. Much local government infrastructure has a 
useful life of 30, 50 or in some cases well over 100 years. While individuals involved may come and 
go, municipalities continues to render services perpetually. 


Long Term Financial Sustainability Policy 


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4.3 This poses the question: Con we continue the revenue ond expenditure potterns of recent years 
while maintaining the levels ofservice expected by the local community? 

4.4 Drakenstein like other municipalities worldwide have large infrastructure maintenance and 
renewal backlogs and as a result our communities were enjoying infrastructure which would, and 
was beginning to, fall apart - and which would be left for our children to fix up. 

4.5 Drakenstein don't want to continue with very low levels of debt, because then they would be 
trying to rebuild long-lasting infrastructure out of current revenue rather than recovering the cost 
over the useful life of the infrastructure. In some circumstances, a deferral of infrastructure 
renewal and replacement is a worse 'sin' than borrowing to finance such renewal / replacement 
of infrastructure. 

4.6 Drakenstein's leaders, administrators and communities should not only think about the state of 
infrastructure and other assets we would leave to our children, but what we would leave to our 
grandchildren and great grandchildren. This is often referred to as 'intergenerational equity'. 

4.7 Another way of describing this is to say that communities were, under past stewardship, living off 
their assets rather than paying their way. We were on a path of wearing out vital infrastructure 
and putting off until the next generation the challenges of renewal. 

4.8 The infrastructure backlogs and challenges facing Drakenstein resulted from short-term thinking 
that failed to seriously address the long-term nature of infrastructure and the on-going 
responsibilities towards the local communities. It is noted that Drakenstein had not been referring 
to financial indicators which could have told leadership and others how we had been performing 
on long-term financial sustainability issues. 

5. Defining Financial Sustainability 


5.1 Three essential elements with regard to services, property taxes, service charges and the impacts 
thereof on future generations needs to be covered in a financial sustainability definition. They are 


(a) To ensure that the maintenance of Drakenstein's high priority expenditure programs, both 
operating and capital, are at the desired levels (programme sustainability); 

(b) To ensure a reasonable degree of stability and predictability in the overall property rates 
and service charges burden (affordability sustainability); and 


Long Term Financial Sustainability Policy 


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(c) To promote a fair sharing in the distribution of Drakenstein's resources and the attendant 
taxation between current and future ratepayers (intergenerational sustainability). 

5.2 In another way, these elements can be seen as what Drakenstein's community expects from 
Council with regard to quality services; reasonable property rates and service charges; and, sound 
long-term financial management. 

5.3 Financial sustainability could therefore be defined as follows - 

Drakenstein's long-term financial operating performance and financial position is sustainable 
where long-term planning and budgeting as well as infrastructure levels and standards are met 
without any substantial unplanned increases in property rates and service charges or inconvenient 
disruptive cuts to services. 

6. Signalling and Communicating Long-Term Financial Sustainability 


6.1 One of the problems of the past was that there had been no common publication of data indicating 
the extent to which municipalities were financially sustainable. In the absence of such data, the 
media and communities tended to focus on three elements - 

(a) Municipality's sizes of our revenue, expenditure or, in particular, debt levels; 

(b) Whether municipality's budgets are balanced (in cash terms); and 

(c) Municipality's annual percentage increases in property rates and service charges revenue. 

6.2 All of these are measured with various financial ratios benchmarking municipalities with one 
another. However, no long-term financial sustainability ratios are used for long-term planning and 
budgeting and since the development status and infrastructure backlogs differs substantially from 
one municipality to another municipality; the focus should rather be on developing long-term 
financial viability ratios instead of comparing one municipality with another through short-term 
financial ratios. 

6.3 Drakenstein communicates or signal important information to their local communities in a variety 
of ways. These include information provided in reports for Council meetings; issues debated at 
Council meetings; annual reports, annual business plans and long-term financial plans; media 
releases and statements by the Executive Mayor / Municipal Manager; and, community 
newsletters, forums, meetings and information on websites. 

6.4 When engaging with a community, written analysis around an annual business plan (IDP) and a 
long-term financial plan is particularly important. It should facilitate community consultation on 


LongTerm Financial Sustainability Policy 


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the likely changes to be made in service delivery, infrastructure spending and imposition of 
property rates and service charges, to provide for or maintain financial sustainability in the longer 
term. In addition, the analysis should make a conscious attempt to ensure a linkage with the 
objectives and goals of the Council. This approach also should result in a clear understanding by 
the community of the Council's proposed direction. 

6.5 Councils using these communication mechanisms had rarely highlighted key financial 
sustainability measures. As a result, current needs and demands of communities often were given 
priority over the Council's long-term sustainability. 

6.6. Drakenstein's long-term financial sustainability needs to be assessed using a standard set of key 
financial indicators. The following three key financial indicators should be communicated with 
Drakenstein's local communities - 

(a) An Operating Surplus Ratio (the percentage by which the major controllable revenue 
source varies from operating expenses) that speaks to the Statement of Financial 
Performance; 

(b) A Net Financial Liabilities Ratio (the significance of the net amount owed compared with 
operating revenue) that speaks to the Statement of Financial Position; and 

(c) An Asset Sustainability Ratio (the extent to which assets are being replaced, compared 
with what is needed to cost-effectively maintain service levels) that speaks to the condition 
of infrastructure assets within the Fixed Assets Register. 

6.7 Of the three, the most important is the operating surplus ratio which indicates whether 
Drakenstein Municipality is living within its means. It indicates the extent to which Drakenstein 
major revenue sources is more, or less than its operating expenses, including non-cash items such 
as depreciation of assets. A Council which has an operating deficit in one year should have a plan 
to achieve a breakeven position in future years. 

6.8 Notwithstanding the usefulness of financial indicators when communicating with ratepayers, the 
most critical measure of the financial sustainability of a municipality is its annual operating result 
(i.e. the extent to which operating revenue is sufficient or insufficient to fund the cost of services). 
Any municipality that incurs on-going operating deficits should be quite clear about the strategic 
implications of this on its future capabilities to sustain current service levels. It means that - 

(a) The rates and service charges that the community are paying are insufficient to cover the 
costs of providing existing levels of service; 

(b) The municipality effectively is running down its existing net assets; and 


Long Term Financial Sustainability Policy 


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(c) In future, the Municipal Council must inevitably reduce service levels, improve efficiency 
and / or increase operating revenue with higher property rates and service charges - and 
the longer it delays remedial action, the more severe the consequences are likely to be. 

6.9 Drakenstein needs to ensure that the range and standard of services to their communities is 
determined having regard to Drakenstein's long-term financial sustainability. This requires a 
particular focus on cost-effective service provision and the maintenance and renewal of assets 
that Drakenstein are responsible for. Drakenstein need to give much greater profile in their 
mainstream communications to their targets for, and performance against, sustainability 
indicators. This information needs to feature more prominently in our primary communication 
tools - including information provided formally to Council meetings, in annual business plans and 
in work with the media. 

6.10 Drakenstein needs to remind ourselves that in local government the Municipal Council and senior 
management are making decisions as a perpetual organisation for current and future generations; 
that the majority of our business, financial and management revolves around community 
infrastructure; that we have significant infrastructure backlog issues which demand greater 
property rates and service charges contributions and /or borrowings and possible reductions in 
"lower priority" service areas if we are to get on top of them; and, this may mean we need to say 
"no" to other governments (unfunded mandates) or our communities in response to demands for 
involvement in issues beyond our current resources and constitutional responsibilities. 

6.11 The above should be readily apparent to our communities and should be highlighted regularly, 
along with our plan to deal with these issues and how we are progressing. 

6.12 Drakenstein acknowledges that municipalities are all different so the appropriate property rates 
and service charges revenue, the appropriate expenditure on infrastructure and the appropriate 
level of indebtedness will look different in an urban developed municipality, compared with a rural 
municipality, compared with a district municipality and compared with a fringe metropolitan high 
growth and economies of scale that cannot be competed with. 

7. Long-Term Financial Sustainability Ratios 


7.1 Indicator 1: Operating Surplus Ratio 

7.1.1 An operating surplus (or deficit) arises when operating revenue exceeds (or is less than) operating 
expenses for a period (usually a year). Just like any household or other organisation, Drakenstein's 
long-term financial sustainability is dependent upon ensuring that, on average over time, its 


Long Term Financial Sustainability Policy 


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expenses are less than associated revenues. In essence this requires current day citizens to fully 
meet the cost of services provided for them by Drakenstein Municipality. 

7.1.2 If Drakenstein is not generating an operating surplus in most periods, then it is unlikely to be 
operating in a financial sustainable way. It means that the cost of services provided to the 
community exceeds the revenue generated. The change of an operating deficit into an operating 
surplus can occur only by ensuring in future that revenues are increased and /or that expenses 
are reduced (at least relative to revenue increases, either by reducing service levels or improving 
productivity). 

7.1.3 Drakenstein was operating with a significant deficit over several years and its strategic 
management and long-term financial plans did not provide clear proposals for this to be turned 
around and it would be inevitable that Drakenstein would face major financial shocks in future. 
The Municipality effectively would be in the same position as an individual or family living beyond 
their means. Sooner or later they would be caught by the consequences. For Drakenstein the 
problem would likely come to a head when existing major assets failed. Drakenstein would then 
need to choose between large property rates and service charges increases or not replacing assets 
thereby effectively lowering its standards of service to its community. 

7.1.4 The operating surplus ratio is the operating surplus / (deficit) expressed as a percentage of 
operating revenue (capital grants excluded). A positive ratio indicates the percentage of total 
accumulated reserves available to help fund future capital expenditure. If the relevant amount is 
not required for this purpose in a particular year, it can be held for future capital expenditure 
needs by either increasing financial assets or preferably, where possible, reducing debt (external 
borrowings) in the meantime. A negative ratio indicates the percentage increase in property rates 
and service charges that are required to achieve a break-even operating result. 

7.1.5 This indicator is by far the most important financial indicator for Drakenstein or any municipality. 
If a municipality consistently achieves a modest positive operating surplus ratio, and has soundly 
based projections showing that it can continue to do so in future, having regard to asset 
management and its community's service level needs, then it is financially sustainable. Favourable 
trend results measured against the other financial indicators described below will assist, but not 
in themselves ensure, that Drakenstein operates sustainably. 

7.1.6 The suggested long-term target range for Indicator 1 (Operating Surplus Ratio) is to achieve, on 
average, an operating surplus ratio of between 0% and 5%. The setting of a lower target would be 
hard to justify. A negative operating surplus target (i.e. a deficit) might be appropriate in the short- 
term if a municipality's community was widely and significantly adversely affected by economic 
conditions. Similarly an annually diminishing negative operating surplus ratio target might be an 
appropriate "roadmap" to progressively achieve financial sustainability for a municipality that had 
previously incurred large operating deficits. This was the case with Drakenstein Municipality. 


Long Term Financial Sustainability Policy 


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7.1.7 As a long-term target, however, a negative operating surplus ratio could be justified only if 
Drakenstein and its community had worked out, and accepted, where this course would lead 
them. That is, that Drakenstein's stock of assets, net of liabilities, would progressively decline in 
value and that Drakenstein Municipality would be unable to fund required rehabilitation or 
replacement of assets, in future, without substantial rises in property rates and service charges. 
This would not normally be acceptable but may be, for example, in cases where there has been 
very significant demographic or service preference change over time and assets are not intended 
to be replaced at the end of their economic useful life. 

7.1.8 Should Drakenstein wish to target a very large operating surplus ratio it needs to be equally clear 
about, and articulate, its reasonsfor doingso. This course of action would mean that the Municipal 
Council would be setting property rates and service charges at levels well in excess of its operating 
expenses. This would have negative implications for its community in terms of intergenerational 
equity. There may nevertheless be compelling reasons for such a strategy. For example 
Drakenstein may have run significant operating deficits in the past and have impending major 
asset replacement needs in excess of a prudent borrowing level. Drakenstein might wish to build 
up financial assets or reduce existing liabilities to help it, in the future, finance this impending 
need. 

7.1.9 The setting of an appropriate target range for the operating surplus ratio is the most important 
financial decision that a Municipal Council must make. It is essential that the elected councillors 
and senior management involved in making this decision are provided with sufficient information 
and training to fully understand all relevant issues and implications. 

7.1.10 The Operational Surplus Ratio to be used by Drakenstein is set out in the table below. The contents 
are self-explanatory. 


Long Term Financial Sustainability Policy 


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_OPERATING SURPLUS RATIO_ 

Operating Surplus Ratio (expressed as a percentage) is an indicator of the extent to which revenues raised cover operational 
expenses only or are available for capital tonding purposes or other purposes. 


Formula 

Ocerafna Resultor NetResult(excludina Caoital Items) 

Total Operating Revenue (excluding Capital Items) 

Target 

Between 0%and 5%perannum (on average overthe long-term) 


Targets 

What does this mean? 

Higher 

than 

target 

> 5%on 
average over 
the long-term 

Whilstexpecting to generate substantial revenues can assistin off-setting pastortuture operating deficits, 
and fund proposed capital expenditure and/ordebtrepayments, the low level ofoperating expenses 
compared to operating revenues could also indicate thata local governmentis providing levels ofservice 
below thatexpected by rate payers 

Within 

target 

range 

> 0%and 
< 5%on 

average over 
the long-term 

A local government is expecting to generate healthy levels of revenues thatcan be used to offeet pastor 
future operating deficits or to fund proposed capital expenditure and/or debt repayments, and is less likely 
to compromise the levels of service expected by ratepayers. 

Below 

target 

range 

(negative 

ratio) 

< 0%on 
average over 
the long-term 

A local government is expecting to not be able to generate sufficient revenues that can cover operating 
expenses and offeet past or future operating deficits or act as a funding source fbr proposed capital 
expenditure and/or debt repayments. The percentage indicates the percentage increase in operating 
revenues needed to achieve a break-even position. 


7.1.11 The current status of Drakenstein's Operating Surplus Ratio as reflected in the Long-Term 
Financial Plan in Chapter 4 of the Integrated Development Plan (IDP) currently under review are 
depicted below. The picture indicates that Drakenstein is moving to long-term financial 
sustainability. 


— ^TotalOperatrg Re/enueaslOO% 

— <H-Externa/ Borrowingscapped at 50% ofTotalOperatrg Revenue 
— ^Actual Borrowrgs asa% ofTotal Operating Revenue 



Long Term Financial Sustainability Policy 


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7.2 Indicator 2: Net Financial Liabilities Ratio 

7.2.1 Net financial liabilities equals total liabilities less financial assets (excluding equity accounted 
investments in Council businesses). 

7.2.2 Often too much focus is placed on the level of a municipality's borrowings. This number has little 
meaning without also considering the municipality's available financial assets and other liabilities. 
It would make no sense for individuals, in assessing their financial positions, to look at one pile of 
bills and ignore others and disregard how much money they have in the bank. The same holds true 
for municipalities. 

7.2.3 Net financial liabilities is a broader and more appropriate measure of indebtedness than the level 
of borrowings, because it includes items such as employee long-service leave entitlements and 
other amounts payable as well as taking account a municipality's cash and investments. 

7.2.4 Before considering an increase in its indebtedness, a municipal Council needs to recognise that 
interest associated with borrowings will impact negatively on its operating result. However 
municipalities with significant asset rehabilitation and replacement backlogs may find that their 
financial sustainability is improved if they raise borrowings to finance the works needed to address 
these backlogs i.e. if the operational savings achieved from addressing these backlogs exceed the 
additional interest costs resulting from the borrowings raised, financial sustainability would be 
improved. 

7.2.5 The net financial liabilities ratio is calculated by expressing net financial liabilities at the end of a 
financial year as a percentage of operating revenue for the year. If the ratio falls, over time, this 
indicates that the Municipality's capacity to meet its financial obligations from operating revenue 
is strengthening. 

7.2.6 An increase in the net financial liabilities ratio will sometimes mean that a municipality is incurring 
higher operating expenses (e.g. as a result of additional maintenance and depreciation costs 
associated with acquiring new assets). This will detract from the Municipality's overall operating 
result. Nevertheless a municipality with a healthy operating surplus could quite appropriately 
decide to allow its net financial liabilities ratio to increase in order to provide additional services 
to its community through acquisition of additional assets without detracting from its financial 
sustainability. 

7.2.7 There is no optimal single number or even narrow range for this indicator. What is important is 
that a Municipal Council understands and is comfortable with its ratio and that it has been 
determined based on future community needs and long-term financial sustainability. 


Long Term Financial Sustainability Policy 


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7.2.8 There is no right or wrong target range for the net financial liabilities ratio. Different Municipality's 
(or the same Municipality at different points of time in its long-term financial plan) could 
appropriately have very different target ranges and each could be equally responsible and 
financially sustainable, depending upon their circumstances. A target range should be set by a 
Municipal Council having regard to the target for its operating surplus ratio and the needs that are 
identified in its long-term financial plan and its infrastructure and asset management plan. 

7.2.9 The target ratio should normally be (especially over the medium to longer-term) greater than 
zero. If not, that is likely to imply that a Municipal Council places a higher priority on accumulating 
financial assets than applying funds generated from ratepayers to the provision of services 
including infrastructure renewal. 

7.2.10 It is suggested that in normal circumstances the target ceiling for a net financial liabilities ratio be 
generally no more than 100% of operating revenue to ensure the ratio remains within 
conventionally prudent limits. However, a well-managed municipality's committed to sound 
financial strategies (particularly during a time of significant development) could comfortably allow 
a higher net financial liabilities ratio. Also, while any target ratio should effectively provide a guide 
to influence revenue and expenditure decisions and to constrain borrowing, it would make sense 
to borrowto fund the replacement of an asset at the end of its "economic useful life" if funds were 
not available from other sources (and assuming that existing service levels were considered 
affordable). 

7.2.11 If a municipality has not yet fully researched its likely medium to longer-term asset rehabilitation 
and replacement needs, it may be appropriate to set a more modest ceiling until this information 
is available and its funding implications assessed. 

7.2.12 The breadth of the suggested range highlights the considerable discretion associated with sound 
management of net financial liabilities. What is important is that a Municipal Council understands 
and is comfortable with its ratio and that it has been determined based on future community 
needs and long-term financial sustainability. 

7.2.13 In practice, it is recommended that a Municipal Council establish a much tighter range for this 
indicator than the very broad range of 0% to 100% suggested above. For example, in any one year 
of its long-term financial plan or in its annual budget, a Council might establish a target range of 
say 50% to 60%. 

7.2.14 The Net Financial Liability Ratio to be used by Drakenstein is set out in the table below. The 
contents are self-explanatory. 


Long Term Financial Sustainability Policy 


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NET FINANCIAL LIABILITIES RATIO _ 

Net Financial Liabilities Ratio (expressed as a percentage) is an indicator ofthe extentto which the netfinancial liabilities of a local 
governmentcan be serviced by its operating revenues. 


Formula 

Total liabilifes - CurrentAssets 

Total Operating Revenue (excluding Capital Items) 

Target 

> 0%butnotmore than 100% oftotal operafng revenue 


Targets 

What does this mean? 

Higher 

than 

target 

> 70% on 
average over 
the long-term 

Alocal governmenthas total financial liabilifes thatexceed currentassets above recommended levels. This 
means that the local government likely has limited capacity to increase its loan borrowings and may 
become over-burdened with debt. 

Within 

target 

range 

> 0%and 
< 70% on 
average over 
the long-term 

Whilst this means net fnancial liabilifes exceed current assets and must be serviced using available 
operafng revenues, the local government remains within recommended levels tbr sustainability. 

Below 

target 

range 

(negative 

ratio) 

< 0%on 
average over 
the long-term 

A local government has current assels that exceed total liabilifes and appears to have the capacity to 
increase its loan borrowings if required. 


7.2.15 The current status of Drakenstein's Net Financial Sustainabiiity Ratio as reflected in the Long- 
Term Financial Plan in Chapter 4 of the Integrated Development Plan (IDP) currently under review 
are depicted below. The picture indicates that Drakenstein is operating within long-term financial 
sustainability targets. 



Long Term Financial Sustainability Policy 


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7.3 Indicator 3: Asset Sustainability Ratio 

7.3.1 This ratio indicates the extent to which existing non-financial assets are being renewed and 
replaced, compared with what is needed to cost-effectively maintain service levels. It is calculated 
by measuring capital expenditure on renewal or replacement of assets, relative to the optimal 
level of such expenditure proposed in a Municipality's infrastructure and asset management plan 
(IAMP). 

7.3.2 If capital expenditure on renewing or replacing existing assets is at least equal to the level 
proposed in the IAMP, then a municipality is ensuring the value of its existing stock of physical 
assets is maintained. Any material under spending on renewal and replacement over the medium 
term is likely to adversely impact on the achievement of preferred, affordable service levels and 
could potentially progressively undermine a municipality's financial sustainability. For example, 
additional maintenance costs associated with assets that have exceeded their economic useful life 
might be higher than costs that would be associated with renewal or replacement. Eventually a 
Municipal Council will be confronted with failed assets, and potentially significant renewal and 
replacement expenditure needs that cannot be accommodated without sudden large property 
rates and service charges increases. 

7.3.3 Achievement of the suggested target would mean that a Municipal Council was reasonably 
optimising the timing of capital outlays on the renewal / replacement of assets. Failure to achieve 
the target would most likely mean that a Municipal Council was not optimising its financial 
sustainability unless it had determined its asset renewal / replacement outlays for the period on 
more accurate and up-to-date technical data than on which the IAMP was based. 

7.3.4 The Net Financial Liability Ratio to be used by Drakenstein is set out in the table below. The 
contents are self-explanatory. 


Long Term Financial Sustainability Policy 


16 




_ASSET SUSTAINABILITY RATIO_ 

Asset Sustainability Ratio (expressed as a percentage) is an indicator of the extentto which the infrastructure assets managed bya 
local governmentare being replaced as they reach the end oftheir usetul lives. 


Formula 

Capital Expenditure on Replacementof Assets (Renewals) 

Depreciation Expenditure 

Target 

> 90%butless than 1107oOfthe level proposed in the Inffastructure and AssetManagementPlan (l&AMP) 


Targets 

What does this mean? 

Higher 

than 

target 

> 1107oon 
average over 
the long-term 

A local government is likely to be over-sufficiently maintaining, replacing or renewing existing infrastructure 
assets befbre they reach the end oftheir useful life. 

Within 

target 

range 

> 907oand 
< 1107oon 
average over 
the long-term 

Alocal governmentis likely to be sufficiently maintaining, replacing or renewing existing infrastructure assets 
as they reach the end of their useful life. 

Below 

target 

range 

(negative 

ratio) 

< 907oon 
average over 
the long-term 

A local government is likely to not be sufficiently maintaining, replacing or renewing existing infrastructure 
assets as they are being depreciated, which may create "renewals backlogs", resulting in a reduction in 
service levels and/or useful lives previously expected. This will likely create a burden on future ratepayers, 
who will either incur financial costs to restore the asset or a convenience cost from not being able to utilise 
the assetfe.g. road closures due to excessive potholes). 


7.3.5 The current status of Drakenstein's Asset Sustainability Ratio as reflected in the Long-Term 
Financial Plan in Chapter 4 of the Integrated Development Plan (IDP) currently under review are 
depicted below. The picture indicates that Drakenstein is operating below long-term financial 
sustainability target but is projecting to move in the right direction. 



Long Term Financial Sustainability Policy 


17 





































8. Acknowledgements 


8.1 Drakenstein Municipality acknowledges the work done by the South Australia Local Government 
Association and the contents of Information Paper 1: Financial Sustainability (Revised 
January 2015) and Information Paper 9: Financial Indicators (Revised February 2015). 


Long Term Financial Sustainability Policy 


18 






DRAKENSTEIN 

MUNISIPAUTEIT • MUNICIPALITY • UMASIPALA 
Paarl | Wellington | Gouda I Saron | Simondium 


Borrowing Policy 





TABLE OF CONTENTS 


1. DEFINITIONS.3 

2. PURPOSE.4 

3. OBJECTIVES OF THE POLICY.4 

4. SCOPE.5 

5. ETHICS.5 

6. PRINCIPLES.5 

7. DELEGATIONS OF AUTHORITY.6 

8. NOMINEE ACCOUNT.6 

9. REGISTERED FINANCIAL INSTITUTIONS.6 

10. GENERAL BORROWING PRACTICE.6 

11. REFINANCING DEBT.9 

12. DEBT REPAYMENT PERIOD.10 

13. SECURITY.10 

14. SHORTTERM DEBT.10 

15. DISCLOSURE.11 

16. GUARANTEES.11 

17. APPROVAL OF LOANS BY THE MUNICIPALITY.11 

18. PROVISION FOR REDEMPTION OF LOANS.12 

19. NON-REPAYMENT OR NON-SERVICING OF LOAN.12 

20. PROHIBITED BORROWING PRACTICES.12 


Borrowing Policy 


2 
























1 . 


DEFINITIONS 


In this policy, unless the context indicates otherwise - 

1.1 "Act" means the Local Government: Municipal Finance Management Act, 2003 (Act 
No. 56 of 2003); 

1.2 “Authorised official'' means an employee of the Municipality responsible for 
carrying out any duty or function, or exercising any power in terms of this policy and 
includes employees delegated to carry out or exercise such duties, functions or 
powers; 

1.3 "Council" means the Municipal Council of the Municipality; 

1.4 "CFO" meansthe Chief Financial Officerofthe Municipality; 

1.5 "Disclosure statement" means a statement issued or to be issued by the 
Municipality which intends to incur debt by issuing municipal debt instruments; 

1.6 "Financing agreement" means any loan agreement, lease, instalment, purchase 
arrangement under which the Municipality undertakes to repay a long-term debt 
over a period of time; 

1.7 "Juristic person" means a body of persons, a corporation, a partnership, or other 
legal entity that is recognized by law as the subject of rights and duties; 

1.8 "Lender" means a juristic person who provides debt finance to the Municipality; 

1.9 "Loan covenant" means a condition in an agreement relating to a loan or bond issue 

that requires the borrower to fulfil certain conditions or which forbids the borrower 
from undertaking certain actions, or which possibly restricts certain activities to 
circumstances when other conditions are met. Violation of a covenant may result in 
a default on the loan being declared, penalties being applied, or the loan being 
recalled; 

1.10 "Long term debt" means debt repayable by the Municipality over a period exceeding 
one (1) year; 

1.11 "Municipality" means the Drakenstein Municipality; 

1.12 "Municipal debt" means: 


Borrowing Policy 


3 




(a) A monetary liability or obligation on a Municipality by - 

i. a financing agreement, note, debenture, bond or overdraft; and 

ii. the issuance of municipal debt instruments; and 

(b) A contingent liability such as that created by guaranteeing a monetary liability 
or obligation of another. 

1.13 "Security" means any mechanism intended to secure the interest of a lender or 
investor and includes any of the mechanisms mentioned; 

1.14 "Short term debt" means debt that is repayable over a period not exceeding one (1) 
year; 

1.15 "Sinking fund" means a fund established where provision is made to accumulate 
sufficient funds to repay the capital on a municipal bond issue at the end of the loan 
period as a lump sum which is termed a 'bullet' payment; and 

1.16 "QBMR" means Quarterly Borrowing Monitoring Return. 

2. PURPOSE 

2.1 To establish a borrowing framework policy for the Municipality and set out the 

objectives, policies, statutory requirements and guidelines for the borrowing of 
funds. 

3. OBJECTIVES OF THE POLICY 

3.1 Drakenstein Municipality's aimed at gaining the lowest interest rate on any external 
borrowings, short-term as well as long-term, but still the credit exposure risk in 
mind. The effectiveness of this policy is to ensure that the cash management 
program make provision for the repayment of interest and redemption on the 
external borrowings. 

3.2 It is the responsibility of council as a trustee of the community's revenue to ensure 
that the best repayment interest rates on external borrowings is obtained through 
a fair and transparent tender process and to ensure compliance with all Legislation 
and Council policy's governing borrowings of funds. 


Borrowing Policy 


4 




4. 


SCOPE 


4.1 The primary goal in the borrowing of funds is to ensure that the funds are obtained 
at the lowest possible interest rates at minimum risk, within the parameters of 
authorized borrowings. 

4.2 Risk Management 

The need to manage interest rate risk, credit risk exposure and to maintain debt 
within specified limits is the foremost objective of the borrowing policy. To attain this 
objective, diversification is required to ensure that the Chief Financial Officer 
prudently manages interest rate and credit risk exposure. 

4.3 Cost of Borrowings 

The borrowings should be structured to obtain the lowest possible interest rate, on 
the most advantageous terms and conditions, taking cognisance of borrowing risk 
constraints, infrastructure needs and the borrowing limits determined by Legislation. 

4.4 Prudence 

Borrowings shall be made with care, skill, prudence and diligence. 

5. ETHICS 

5.1 In dealing with financial institutions, the following ethical principles must be adhered 
to: 

5.1.1 The chief Financial Officer shall not accede to any influence by or interference from 
councillors, borrowing institutions or any outsiders. 

5.1.2 Under no circumstances may inducements to borrow be accepted. 

5.1.3 The business ethics of any controlling body (Financial Services Board) of which 
Drakenstein Municipality is a member must be observed by such institution or body 
at all times. 

6. PRINCIPLES 

6.1 The guiding principles in Chapter 6 of the MFMA in terms of short-term and long-term 

debt must be adhered to in order to facilitate the administration of council's 
borrowings. 


Borrowing Policy 


5 




7. 


DELEGATIONS OF AUTHORITY 


7.1 The relevant Legislation in terms of which borrowing decisions are governed is the 
Local Government Municipal Finance Management Act, No 56 of 2003. 

7.2 The Municipal Regulations on Debt Disclosure has been promulgated (Government 
Gazette no. 29966, 15 June 2007) and has been effective from 01 July 2007 for a 
municipality or municipal entity. Refer to Annexure A2, Municipal Finance 
Management Act: Municipal Regulations on Debt Disclosure. 

7.3 Council is the only body that can approve external borrowing as a budget item. The 
Bid Adjudication committee appoints the tender to the successful bidder and 
thereafter Council will delegate to the Municipal Manager of the municipality to 
enter into a contract with the successful bidder and the signing thereof. 

8. NOMINEE ACCOUNT 

8.1 All monies disbursements as a result of the borrowing must be placed into the 
primary bank account of the municipality and this account must be reported to 
National and Provincial treasury and the Auditor general in terms of section 9 (a) and 
(b) ofthe MFMA. 

9. REGISTERED FINANCIAL INSTITUTIONS 

9.1 When borrowing needs to be done it should be required from the borrowing 
institutions to state weather they are registered in terms of the bank act of 1990 
and/or any other applicable legislation. 

10. GENERAL BORROWING PRACTICE 

10.1 GENERAL 

10.1.1 Borrowings shall be done at an institution offering the most favourable repayment 
interest rates on the amount to be borrowed over a specific period. 

10.1.2 Institutions shall be advised that in submittingtheirtenders they must offertheir best 
interest rates for the repayment of the interest and redemption on the borrowings. 
Council have the write to take on a loan in full or just part thereof. 

10.1.3 After submission of the tender no discussion or negotiation will be entered into until 
such time the tender is awarded to the successful bidder. 


Borrowing Policy 


6 




10.1.4 Certificates of balances on the outstanding amounts on the loans must be acquired 
and the end of the financial year. 

10.2 TYPES OF LOANS AND FINANCING 

10.2.1 Annuity loans 

Annuity loans are straight forward and uncomplicated. The loan amount, interest 
rate and repayment period offered by the Financial Institution are fixed. The 
calculation of the instalment payable on an annuity/fixed redemption basis is simple 
and straight forward. Normally with an annuity loan, the instalment of the loan will 
be repaid in equal six monthly instalments over the term of the loan. The capital 
portion of the instalment will increase over the duration of the loan, and conversely, 
the interest amount charged will decrease over the loan period. Where the interest 
rate offered by the Financial Institution is on a variable basis, an interest rate swap 
(IRS) should be taken out. An IRS agreement will need to be signed with the party 
agreeing to accept the variable rate and in turn, offer the fixed rate to the 
Municipality. An Interest Rate Swap Agreement must comply with the terms set out 
by the International Swap Dealers Association (ISDA). The fixing of debt repayments 
is an important consideration in meeting the financial requirements of the 
Municipality, that of annually producing a balanced budget. There are from time to 
time various options offered by Financial Institutions which need to be treated on 
their merits and which could invariably result in slightly lower interest rates being 
offered. 

10.2.2 Bullet payment redemption 

In this instance, the total capital is usually repaid at the end of the term and interest 
on the total amount borrowed is paid annually or semi-annually. The interest rate 
can be fixed and the interest payable is known for the duration of the loan. Cash has 
to be set aside to repay the capital at the end of the term. The lender could require 
security in the form of an investment (sinking fund). 

10.2.3 Bonds 

A Bond is an instrument used by Government and Parastatals such as Telkom, Eskom, 
Transnet, Corporates and Municipalities to raise loan capital on the open market. 
Bond holders have the right to interest, usually paid on a semi-annual basis, and the 
repayment of the capital amount reflected on the stock certificate held on maturity 
date. The coupon, maturity, principal value and market value are intrinsic features of 


Borrowing Policy 


7 




a Bond. The most critical variable factor in determining Bond rates is the expected 
long term trend in inflation, in order to provide a return that equals inflation plus a 
risk premium. The higher the risk attached to a borrower, the higher will be the risk 
premium investors will demand. During its tenure the Bond will trade on the Bond 
market at prevailing interest levels. The price of a Bond trading at any given time on 
the market is a function of prevailing interest rates. Bond prices move inversely to 
movements in interest rates. 

10.3 OTHER CONSIDERATIONS 

10.3.1 The Municipality has by the judicious use of surplus funds and external long term 
debt implemented its Integrated Development Plan, which has facilitated the much 
needed service delivery program. 

Factors to be considered when borrowing: 

(a) The type and extent of benefits to be obtained from the borrowing; 

(b) The length of time the benefits will be received; 

(c) The beneficiaries of the acquisition or development; 

(d) The impact of interest and redemption payments on both current and 
forecasted property tax and services revenue; 

(e) The current and future capacity of the property tax base and rendering of 
services to pay for borrowings and the rate of growth of the property tax base 
and services; 

(f) Likely movements in interest rates for variable rate borrowings; 

(g) Other current and projected sources of funds; 

(h) Competing demands for funds; and 

(i) Timing of money market interest rate movements and the long term rates on 
the interest rate curve. 

10.3.2 The Municipality will, in general, seek to limit its dependence on borrowings in order 
to minimise future revenue committed to debt servicing and redemption charges. 
The Municipality may only borrow funds, in terms of the Municipal Finance 
Management Act, for the purpose of acquiring assets, improving facilities or 
infrastructure to provide service delivery. 

10.3.3 Drakenstein Municipality may incur long term debt only for the purpose of Capital 
expenditure on infrastructure, property, plant or equipment to be used for the 
purpose of achieving the objects of Local Government as set out in section 152 of the 
Constitution. 


Borrowing Policy 


8 




10.3.4 The use of external loans should be limited to financing infrastructure where a return 
can be realised from tariffs to service the debt, or major infrastructure exceeding R10 
million for a single project, with long term benefits to the community as a whole, 
where indirect revenue streams are evident. 

10.3.5 The current gearing for external loans should not exceed the 50% mark (total 
outstanding debt -r total operating revenue less conditional grants). However, if 
investment in infrastructure is needed to stimulate economic development with clear 
benefits for the community as a whole over the short and medium term, then the 
gearing ratio may exceed the 50% mark provided that interest and redemption to 
service external loans shall not exceed 20% of total operating. 

10.4 CONTROL AND MONITORING BORROWINGS 

10.4.1 A proper record must be kept and maintained of all the borrowings made, indicating 
at least the Institution, Borrowing amount, Interest rate, Start date, Closing date, 
Redemption amount, Interest amount and the purpose on the borrowing. 

10.4.2 Repayment schedules received from the borrowing institutions must be checked to 
verify the correctness of the repayments. Repayment of Interest and redemption 
must be done in time to avoid penalty interest. 

10.5 REPORTING 

The Financial Officer shall in terms of section 71 report to National and Provincial 
treasury on the state of the borrowings. This reporting must be done on a monthly 
and quarterly basis. 

A report on the stand of the borrowings must also be submitted to council. A report 
is drawn up marked "Appendix A "to be included in the Annual Financial Statements. 

11. REFINANCING DEBT 

11.1 Section 46 of the Municipal Finance Management Act provides that the Drakenstein 
Municipality may refinance existing long term debt, if such refinancing is in 
accordance withtheframeworkas prescribed bythe Municipal Finance Management 
Act, as follows: 

(a) The Municipality may borrow moneyfor the purpose of refinancing existing long 
term debt, provided the existing long term debt was lawfully incurred and the 
refinancing will not extend the term of the debt beyond the useful life of the 


Borrowing Policy 


9 




infrastructure, property, plant or equipmentfor which the money was originaily 
borrowed. 

11.2 Cognisance must be taken of any early repayment penalty clauses in the initial loan 
agreement, as part of the financial feasibility assessment. No loans will be 
prematurely redeemed unless there is a financial benefit to the Municipality. 

12. DEBT REPAYMENT PERIOD 

12.1 Whilst the period for which loan debt may be received will vary from time to time 
according to the needs of the various Lenders, presently the typical debt repayment 
period for loans is fifteen years, though not closely matching the underlying asset 
lives serviced by the loans. 

12.2 Cognisance is taken of the useful lives of the underlying assets to be financed by the 
debt, and, moreover, careful consideration is taken of the interest rates on the 
interest yield curve. Should it be established that it is cost effective to borrow the 
funds on a shorter duration (as opposed to the life of the asset) as indicated by the 
interest yield curve, the loan will be negotiated to optimise the most favourable and 
cost effective benefit to the Municipality. 

13. SECURITY 

13.1 In terms of the Municipal Finance Management Act the Municipality may provide 
security for any of its debt obligations, including the giving of a lien, pledging, 
mortgaging or ceding an asset, or giving any other form of collateral. It may cede as 
security any category of revenue or rights of future revenue. Some Lenders may 
require the Municipality to agree to restrictions on debt that the Municipality may 
incur in future until the secured debt is settled. 

14. SHORTTERM DEBT 

14.1 The Municipal Finance Management Act provides that the Municipality may incur 
short term debt only when necessary to bridge shortfalls within a financial year 
during which the debt is incurred, in expectation of specific and realistic anticipated 
income to be received within that financial year; or capital needs within a financial 
year, to be repaid from specific funds to be received from enforceable allocations or 
long term debt commitments. 

14.2 The municipal council may approve an individual transaction or a credit facility for a 
line of credit or overdraft facility. 


Borrowing Policy 


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14.3 The Municipality must pay off short term debt within the same financial year and may 
not renew or refinance its short term debt if it will have the effect of extending the 
short term debt into a new financial year. 

15. DISCLOSURE 

15.1 The Municipality must, when interacting with a prospective Lender or when 
preparing documentation for consideration by a prospective Investor, disclose all 
relevant information that may be requested or that may be material to the decision 
of the prospective Lender or Investor. Reasonable care must be taken to ensure the 
accuracy of any information disclosed. Whilst this is a standard and acceptable 
business practice, it is also in compliance with section 49 of the Municipal Finance 
Management Act. 

16. GUARANTEES 

16.1 The Municipal Finance Management Act provides that the Municipality may not 
guarantee any debt of any entity unless the entity is a Municipal entity under its sole 
ownership control. The debt must be reflected in the approved business plan of the 
entity. The guarantee must be authorised by the Municipality. This must be done in 
the same manner and subject to the same conditions applicable to any other 
borrowings. Neitherthe National nor Provincial Government may guarantee the debt 
of any Municipality. 

17. APPROVAL OF LOANS BY THE MUNICIPAUTY 

17.1 Section 46 of the Municipal Finance Management Act stipulates that the Municipality 
may incur long-term debt only if a resolution of the Council, signed by the mayor, has 
approved the debt agreement and the Accounting Officer has signed the agreement 
or other document which acknowledges the debt. At least 21 days prior to the 
meeting of the Council at which approval for the debt is to be considered, the 
Municipality must make public an information statement setting out particulars of 
the proposed debt, including the amount of the proposed debt, the purposes for 
which the debt is to be incurred and particulars of any security to be provided. The 
Public, the National Treasury and Provincial Treasury must be invited to submit 
written comments or representations to the council in respect of the proposed debt. 

17.2 A copy of the information statement submitted to Council at least 21 days prior to 
the meeting to approve the loan agreement must contain particulars of - 


Borrowing Policy 


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(a) the essential repayment terms, including the anticipated debt repayment 
schedule; and 

(b) the anticipated total cost in connection with such debt over the repayment 
period. 

18. PROVISION FOR REDEMPTION OF LOANS 

18.1 Drakenstein Municipality may borrow from Institutions and set up sinking funds to 
facilitate loan repayments, especially when the repayment is to be met by a bullet 
payment on the maturity date of the loan. These sinking funds may also be invested 
directly with the Lender's Bank. The maturity date and accumulated value of such 
investment must coincide with the maturity date and amount of the intended loan 
that is to be repaid. 

19. NON-REPAYMENT OR NON-SERVICING OF LOAN 

19.1 Drakenstein Municipality must honour all its loan obligations timeously. Failure to 
effect prompt payment will adversely affect the raising of future loans at favourable 
costs of borrowing. 

19.2 Failure to pay any loan instalment, even by one day, and even if only through 
administrative oversight, will have severe repercussions, and may jeopardise the 
Municipality's credit rating. 

19.3 In addition to the timeous payment of the loans, the Municipality must adhere to the 
covenants stipulated in the loan agreements. 

20. PROHIBITED BORROWING PRACTICES 

20.1 Drakenstein Municipality shall not borrow for investment purposes, with the sole 
purpose of investing to earn a return. The cost of debt is almost always more 
expensive than the return that the Municipality can derive by investing in permitted 
investments. 

20.2 Foreign Borrowing is permitted in terms of section 47 of the Municipal Finance 
Management Act, whereby the debt must be denominated in Rand and is not indexed 
to, or affected by, fluctuations in the value of the Rand against any foreign currency. 


Borrowing Policy 


12 






DRAKENSTEIN 

MUNISIPAUTEIT • MUNICIPALITY • UMASIPALA 
Paarl | Wellington | Gouda I Saron | Simondium 


Cash & Investment 
Management Policy 


www.drakenstein.gov.za 


A city of excellence 





TABLE OF CONTENTS 


1. DEFINITIONS.3 

2. LEGAL FRAMEWORK.4 

3. INVESTMENT POLICY OBJECTIVES.4 

4. CASH MANAGEMENT.5 

5. STANDARDS OF ETHICS, JUDGEMENT AND DUE CARE.8 

6. INVESTMENT PRINCIPLES AND PRACTICES.9 

7. CASH MANAGEMENT PRINCIPLES AND PRACTICES.11 

8. CONTROLS OVER MANAGEMENT OF CASH & INVESTMENT.17 

9. DELEGATION OF AUTHORITY.18 

10. SHORT TITLE.18 


Cash & Investment Management Policy 

2 














1 . 


DEFINITIONS 


For the purpose of this policy, unless the context indicates otherwise, any word or 
expression to which a meaning has been attached in the Act shall bear the same 
meaningand means:- 


1.1 "Accounting Officer" is a person appointed by the Municipality in terms of Section 82 
of the Local Government: Municipal Structure Act, 1998 (Act No. 117 of 1998) and who 
is the head of administration and also the City Manager for the Municipality; 

1.2 "Cashiers" are any municipal official appointed to receive cash or any other form of 
payment(s) on behalf of Drakenstein Municipality at any of the receipting points 
within Drakenstein Municipality area. 

1.3 "Chief Financial Officer" is an officer of the municipality appointed as the Head of 
the Finance Department and includes any person - 

(a) Acting in such position; and 

(b) To whom the Chief Financial Officer has delegated a power, function or duty in 
respective of such a delegated power, function or duty; 

1.4 "Council" or "Municipal Council" is a Municipal Council referred to in section 18 of 
the Local Government: Municipal Structures Act, 1998 (Act No. 117 of 1998) and for 
purposes of this policy, the Municipal Council of the Drakenstein Municipality; 

1.5 "Councillor" is a member of the Municipal Council; 

1.6 "Investments" is funds not immediately required for the defraying of expenses and 
invested at approved financial institutions; 

1.7 "City Manager" isthe AccountingOfficerappointed intermsofsection82ofthe Local 
Government: Municipal Structures Act, 1998 (Act No. 117 of 1998) and being the 
head of administration and Accounting Officer in terms of section 55 of the Local 
Government: Municipal Systems Act, 2000 (Act No 32 of 2000) and includes any 
person - 

(a) Acting in such position; and 

(b) To whom the City Manager has delegated a power, function or duty in 
respective of such a delegated power, function or duty; 

1.8 "Municipality" is the institution that is responsible for the collection of funds and the 
provision of services to the customers of Drakenstein; and 


Cash & Investment Management Policy 


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1.9 "Municipal Official or Official" any employee of the Drakenstein Municipality; 

1.10 "Public funds" are all monies received by the municipality to perform the functions 
allocated to them. 

2. LEGAL FRAMEWORK 

2.1 The Cash & Investment Management Policy is in accordance with the requirements 
of section 13 of the Municipal Finance Management Act and any further 
prescriptions made by the Minister of Finance. 

2.2 The municipality shall at all times conduct its Cash and Investment Management 
Policy in compliance with the provisions and any further prescriptions made by the 
Minister of Finance in terms of the Municipal Finance Management Act No. 56 of 
2003. 

2.3 The Local Government: Municipal Finance Management Act Municipal Investment 
Regulations have been promulgated and have effect as from 1 April 2005. 

3. INVESTMENT POLICY OBJECTIVES 

3.1 Drakenstein Municipality's main objectives of this Policy are - 

(a) To ensure compliance with the relevant legal and statutory requirements 
relating to cash management; 

(b) To ensure the preservation and safety of the municipality's investments; 

(c) To ensure diversification of the municipality's investment portfolio across 
acceptable investees, permitted types of investments and investment 
maturities; 

(d) To ensure timeous reporting of the investment portfolio as required by the Act 
in accordance with Generally Recognised Accounting Practice (GRAP); and 

(e) To ensure that the liquidity needs of the municipality are properly addressed. 


Cash & Investment Management Policy 


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3.2 This Policy is aimed at gaining the optimal return on investments, without incurring 
undue risks, during those periods when cash revenue is not needed for capital or 
operational purposes. The effectiveness of the Policy is dependent on the accuracy 
of the municipality's cash management programme, which has to identify the time 
when and period, for which such revenues are surplus. 

3.3 It is Council's responsibility as a trustee of the community's revenue, to ensure that 
the money that is not immediately required should be invested in order to optimise 
the funds available to the municipality and cash resources are effectively and 
efficiently managed. 

4. CASH MANAGEMEIMT 

4.1 Bank Account Administration: (MFMA - Section 7, 8, 9 and 10) 

4.1.1 Cash Management: 

All cash that has been receipted at all receipting points within the Drakenstein 
Municipality area are deposited into the current primary bank account the following 
working day. 

(a) Cash Surpluses and Shortages 

(i) Surpluses: Cash Surpluses on hand after daily balancing of cashiers is to be paid 
in the next working day into a surplus vote number. 

(ii) Shortages: Shortages with a value of R100 or less must be paid in by the cashier 
at end of their daily shifts. Amounts greater than R100 gets deducted once off 
from their next salary payment. 

4.1.2 Cheque Management: 

Cheques are printed in batch format (to be inserted into line printers) to prevent the 
removing of cheques from a batch. Cheques are delivered in sealed boxes where 
strict control is exercised over the numerical sequence of cheques on the expenditure 
system by means of a cheque register. 

4.1.3 Delegations / Rights: 

The incumbents of the following post are authorised to sign cheques on behalf of 
Council. 


Cash & Investment Management Policy 


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(a) Cheques 

A-Signatories: City Manager; 

Chief Financial Officer; 

Senior Manager: Budget, Assets and Financial Reporting; 
Senior Manager: Revenue and Expenditure; 

Manager: Revenue; 

Manager: Expenditure; 

Manager: Financial Statements, Reporting and Cash 
Management; 

Manager: Budget and Cost Accounting; and 
Manager: Assets and Insurance Management. 

B-Signatories: Chief Accountant: Financial Statements & Reporting; 

Chief Accountant: Budgets; 

Chief Accountant: Creditors Administration; 

Chief Accountant: Cash Management; 

Chief Accountant: Immovable Assets; 

Senior Accountant: Water & Electricity Billing; 

Senior Accountant: Property Rates, Sundries, Flousing & Pre- 
Paid Billing; and 

Senior Accountant: Credit Control, Customer Care, Indigent 
Support & Revenue Protection. 

(b) Electronic Fund Transfers: 

Authorisation same as per cheques above. 

(c) PettyCash: 

Petty cashiers receive an amount (float) to reimburse employees for 
expenditure to a maximum amount as set out in the Petty Cash Policy. 

(d) Control over bank accounts: 

The City Manager will in writing authorise the Chief Financial Officer or any 
other senior financial official of the Municipality to exercise control over the 
investment or withdrawal of funds in any bank account of the Municipality. 


(e) Receipting of money: 


Cash & Investment Management Policy 


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The following persons or institutions have delegated power to receive money 
on Council's behalf- 

(i) Officials acting as municipal cashiers through the receiving of cash and 
other payment instruments at all receipting points within the Drakenstein 
Municipality area; and 

(ii) 3rd Party Vendors as contracted as listed in Annexure A: Contracted 3rd 
Party Vendors. 

Management will have the delegated right to review and amend Annexure A 
on an annual basis provided that all amendments must be reported to Council. 

4.1.4 Private money: 

No municipal employee is allowed to - 

(a) Use Council's cash funds at any stage to be replaced at a later stage; 

(b) Change a municipal official's (private) cheque for cash; and 

(c) Safeguard private money amongst Council's cash (e.g. Cashier drawers, petty cash 
boxes, and safes, etcetera). 

4.1.5 Management of cash flow: 

The Chief Financial Officer shall maintain a cash flow system, and ensure that funds 
not immediately required are invested as required. All Departments or Directorates 
shall in this regard furnish the Chief Financial Officer with their respective cash flow 
needs on a monthly basis, clearly indicating possible future dates of payments, as well 
as any possible inflow of cash from other sources of finance arranged by Departments 
themselves. 

4.1.6 Working Capital: 

The provision for doubtful debts is calculated on a probability basis, which takes the 
following factors into account: Debtor type, age of debt, number of cut-off, whether 
the debtors has been handed over as well as the ownership status. 


4.1.7 Cashier Floats 


Cash & Investment Management Policy 


7 




Cashiers receive an amount (float) which needs to be returned to the municipality at 
the end of each their individual shifts. These floats are used to give change to 
consumer after paying their municipal accounts, motor registrations, fines, etc. 

Floats currently allocated: 

• Supervisor (Chief Clerk): Float of Rl,500 each; 

• Cash Management Cashiers: Float of R500 each; 

• Traffic Department Cashiers: Float of Rl,500 each; 

• Library Cashiers: Float of R500 each (except Simondium, Gouda, Saron and 
Hermon Library which has a R100 float); 

• Swimming Pool Cashiers (in Season only): Float of R200 each; and 

• Resorts Cashiers: Float of R500 each. 


5. STANDARDS OF ETHICS, JUDGEMENT AND DUE CARE 

5.1 In dealing with financial institutions, the following ethical principles must be 

observed - 

(a) The Chief Financial Officer shall not accede to any influence by or interference 
from councillors, investment agents, institutions or any other outsiders and will 
take reasonable steps to ensure the diversity of its investment portfolio across 
investees, type of investments and investment maturity; 

(b) All investments made must be genuine investments and not investments made 
for speculation purposes; 

(c) All investments made on behalf of Drakenstein Municipality must be made in 
the name of the Municipality; 

(d) Under no circumstances may inducements to invest be accepted; 

(e) The CFO or any delegated official shall not as a general rule discuss nor disclose 
interest rates quoted by one institution to another institution while the 
investment transaction is in progress or any information regarding the current 
cash position or its projected future cash flows of the municipality to investees. 
After the transaction has been finalised, limited information such as interest 
rates quoted by one institution may be disclosed to another institution; and 

(f) The business ethics of any controlling body of which the relevant financial 
institution is a member must be observed by such institution or 
body at all times. 


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6 . 


INVESTMENT PRINCIPLES AND PRACTICES 


6.1 According to Government Gazette No. 27431 of 1 April 2005, the following are 

permitted investments which a municipality may invest in - 

(a) Securities issued by the national government; 

(b) Listed corporate bonds with an investment grade rating from a national or 
internationally recognised credit rating agency; 

(c) Deposits with banks registered in terms of the Banks Act, 1990 (Act No. 94 of 
1990); 

(d) Deposits with the Public Investment Commissioners as contemplated by the 
Public Investment Commissioners Act, 1984 (Act No. 45 of 1984); 

(e) Deposits with the corporation for Public Deposits as contemplated by the 
Corporation for Public Deposits Act, 1984 (Act No. 46 of 1984); 

(f) Banker's acceptance certificates or negotiable certificates of deposits of bank 
registered in terms of the Banks Act, 1990; 

(g) Guaranteed endowment policies with the intention of establishing a sinking 
fund; 

(h) Repurchase agreement with banks registered in terms of the Banks Act, 1990; 

(i) Municipal bonds issued by a municipality; and 

(j) Any other investment type as the Minister may identify by regulation in terms 
of section 168 of the Act, in consulting with the Financial Services Board. 

6.2 Taking the above mentioned guidelines into account, the following guiding principles 

are to be adhered to in order to facilitate the administration of Council's investment 

portfolio. 

6.2.1 Limit exposure to single institution 

(a) Investment of funds, where this involves large amounts, should be distributed 
over more than one institution in order to limit Council's risk exposure. 


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(b) It is considered prudent that not more than 50% (thus implying 50.01% and 
more) of Council's investment portfolio should be held with any specific 
Institution, as identified in Annexure B: Preferred List of Investment 
Institutions, at time of investment. 

(c) Management will have the delegated right to review Annexure B on an annual 
basis and change (if necessary), provided that all changes should be reported 
to Council. 

6.2.2 Risks and Return 

(a) Although the objective of the Chief Financial Officer in making investments on 
behalf of the municipality shall always be to obtain the best interest rate on 
offer, this consideration must be tempered by the degree of risk involved in 
regard to both the financial institution and the investment instrument 
concerned. 

(b) No investment shall be made with an institution where the degree of risk is 
perceived to be higher than the average risk associated with investment 
institutions. 

6.2.3 Borrowing for Re-lnvestment 

(a) Council should refrain from borrowing monies for the purpose of re- 
investment, as this is tantamount to speculation with public funds. 

6.2.4 Nominee Accounts 

(a) All monies shall be invested directly with the relevant institutions. On no 
account may monies be placed in a nominee account. 

6.2.5 Prohibited Investments 

(a) Drakenstein Municipality shall not be permitted to make investments in - 

(i) Listed or unlisted shares, or unit trusts; 

(ii) Stand-alone derivative instruments; 

(iii) Investments denominated in, or linked to, foreign currencies; 


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(iv) Market linked endowment policies; or 


(v) Credit linked notes. 

(b) The municipality shall not borrow for the purpose of investing. 

(c) The municipality shall not buy and sell money market instruments, to speculate 
with the view to making capital profits. 


7. CASH MANAGEMENT PRINCIPLES AND PRACTICES 

7.1 General 

1.1 Should it be ascertained that surplus funds are available for investment; 
then written quotations should be obtained from financial institutions for 
various forms of investment, investment terms and rates of interest. 

1.2 The investment shall be placed with an institution offering the most 
favourable rate provided such investment is in accordance with the terms 
and conditions of this policy. 

1.3 Institutions should be advised that, in submitting quotations, they must 
offer their best rates of interest and that no further negotiation or discussion 
will be entered into with them after they have submitted their quotation. 

7.2 Payment of Commission 

7.2.1 A certificate shall be issued in respect of each and every investment made 
by the financial institution receiving the investment and no payment of any 
commission or payment in kind will be made to any party in respect of the 
investment so made. 

7.3 Internal Investments 

7.3.1 Before planning to invest funds externally, consideration must be given to 
whether the funds may be utilised at an equivalent rate to substitute 
external borrowing as there is normally a margin between the rate at which 
Council may borrow funds and the rate at which investments may be made 
over similar periods. 


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7.4 


Cash at Bank 


7.4.1 When funds are held in a current account, it is a good business practice to 
operate a call account. The overriding principle is that funds in the current 
account are to be kept at an absolute minimum, except if interest rate on 
current account is more or less the same than a call deposit account. 

7.5 Credit Worthiness 

7.5.1 Prior to investing in smaller registered financial institutions, the Financial 
Officer must ensure that the Council is not over-exposed and should satisfy 
itself as to the credit-worthiness and previous track record of the institution 
before placing funds. 

7.6 Receipting Management (Section 64 of MFMA) 

7.6.1 All moneys received and receipted must be deposited the next working day 
in Council's primary bank account. 

7.6.2 All revenue received by the Municipality, including revenue received by any 
collecting agent on its behalf, is recorded at least on a weekly basis. 

7.6.3 All monies collected by the Municipality on behalf of another organ of state 
must be transferred to that organ of state at least on a monthly basis. 

7.7 Expenditure Management (Section 65(2)(d) of MFMA) 

7.7.1 All payments by the Municipality are made - 

(a) Directly to the person to whom it is due unless otherwise for reasons 
as may be prescribed; 

(b) Either electronically or by way of non-transferable cheques or cash 
payments for exceptional reasons and only to an approved / 
prescribed limit; and 

(c) Creditor's payments must be paid within 30 days of the creditor's 
statement, with the exception of BBEEE's, where a seven day payment 
cycle may apply. 


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7.7.2 All payments are requested (payment requisition) by one signatory (B- 
signatory) and authorised by a second signatory (A-signatory). The 
responsibility lies with the B-signatory to verify all payments for corrections. 

7.7.3 Cheque and electronic payments must be signed by two authorised 
signatures, two A-signatories or one A-signatory and one B-signatory. Two 
B-signatories may not authorise cheque and electronic payments. 

7.8 Withdrawals (Section 11 of MFMA) 

7.8.1 Only a senior official(s) acting on the written authority of the Accounting 
Officer may withdraw money or authorise the withdrawal of money from 
any of the Municipality's bank accounts and may do so only - 

(a) To defray expenditure appropriated in terms of an approved budget; 

(b) To defray expenditure authorised in terms of section 26(4); 

(c) To defray unforeseeable and unavoidable expenditure authorised in 
terms of section 29 (1); 

(d) In the case of a bank account opened in terms of section 12, to make 
payments from the account in accordance with subsection (4) of that 
section; 

(e) To pay over to a person or organ of state money received by the 
municipality on behalf of that person or organ of state, including - 

(i) Money collected by the municipality on behalf of that person or 
organ of state by agreement; or 

(ii) Any insurance or other payments received by the municipality 
for that person or organ of state; 

(f) To refund money incorrectly paid into a bank account; 

(g) To refund guarantees, sureties and security deposits; 

(h) For cash management and investment purposes in accordance with 
section 13; 

(i) To defray increased expenditure in terms of section 31; or 


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(j) For such other purposes as may be prescribed. 


7.8.2 Money may be withdrawn from a bankaccount in terms of subsection 7.8.1(b) 

to (j) without appropriation in terms of an approved budget. 

7.8.3 The Accounting Officer must within 30 days after the end of each quarter - 

(a) Table in the municipal council a consolidated report of all withdrawals 
made in terms of subsection 7.8.l(b) to (j) during that quarter; and 

(b) Submit a copy of the report to the relevant provincial treasury and the 
Auditor-General. 

7.9 Short Term Debt (Section 45 of MFMA) 

7.9.1 A municipality may incur short-term debt only in accordance with and subject 

to the provisions of this Act and only when necessary to bridge - 

(a) Shortfalls within a financial year during which the debt is incurred, in 
expectation of specific and realistic anticipated income to be received 
within that financial year; or 

(b) Capital needs within a financial year, to be repaid from specific funds 
to be received from enforceable allocation or long-term debt 
commitments. 

7.9.2 A municipality may incur short-term debt only if - 

(a) A resolution of the municipal council, signed by the mayor, has 
approved the debt agreement; and 

(b) The Accounting Officer has signed the agreement or other document, 
which creates or acknowledges the debt. 

7.9.3 For the purpose of subsection (2)(a), a municipal council may - 

(a) Approve a short-term debt transaction individually; or 


Cash & Investment Management Policy 


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(b) Approve an agreement with a lender for a short-term credit facility to 
be accessed as and when required, including a line of credit or bank 
overdraft facility, provided that - 

(i) The credit limit must be specified in the resolution of the council; 

(ii) The terms of the agreement, including the credit limit, may be 
changed only by a resolution of the council; and 

(iii) If the council approves a credit facility that is limited to 
emergency use, the Accounting Officer must notify the council in 
writing as soon as practical of the amount, duration and cost of 
any debt incurred in terms of such a credit facility, as well as 
options for repaying such debt. 

7.9.4 A municipality - 

(a) Must pay off short-term debt within the financial year; and 

(b) May not renew or refinance short-term debt, whether its own debt or 
that of any other entity, where such renewal of refinancing will have 
the effect of extending the short-term debt into a new financial year. 

7.9.5 Alender- 

(a) No lender may wilfully extend credit to a municipality for the purpose 
of renewing or refinancing short-term debt that must be paid off in 
terms of subsection (4)(a). 

(b) If a lender wilfully extends credit to a municipality in contravention of 
paragraph (a), the municipality is not bound to repay the loan or 
interest on the loan. 

7.9.6 Subsection (5)(b) does not apply if the lender - 

(a) Relied in good faith on written representations of the municipality as 
to the purpose of the borrowing; and 

(b) Did not know and has no reason to believe that the borrowing was for 
the purpose of renewing or refinancing short-term debt. 


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7.10 


Cash Procedures 


7.10.1 Internal Controls 

The supervisor checks floats of all the cashiers on daily basis. 

7.10.2 Issuing of Receipts 

Potential clients come to the cash office, provide cashier with a municipal 
account to make a payment, the cashier will then issue a receipt. 

7.10.3 Cancellation of Receipts 

If and when the cashier makes an error in respect of payment receipted, the 
cashier will call the supervisor, to cancel the receipt. This is done while the 
client is still at the cash office, and re-issues the correct receipt to the client. 
The cashier and the supervisor then sign the cancelled receipt. 

7.10.4 Cash Balancing 

After the end of each shift, the cashier will count the monies received, and 
do a daily cashier balancing. If the amounts entered by the cashier are 
correct the system automatically prints a balancing report, but if the 
amounts entered by the cashier are not correct, the supervisor is called. The 
supervisor will then re-count the money, as well as the cash float, enter the 
supervisor password to establish what the cash collected for the day should 
be. If short the cashier will then pay the monies in immediately (refer to 
section 4.1.1(a)(ii)), if there is a surplus the cashier will receipt the surplus 
on the next working day. If the cashier balance's with the first attempt the 
procedure is that the supervisors will re-count the cash collected for the day, 
do a supervisor balancing and a report is generated automatically. This then 
balances off the cashier for that day and the day is then closed off and no 
transactions can be done for that day. 

7.10.5 Official Payment Receipting Methods 

(a) Direct Deposits, EFT payments and ACB (debit orders) 

(i) Client will do a direct deposit into municipal bank account via 
the Internet or by deposit slip via their bank, using municipal 
account number, traffic fine reference number or any other 


Cash & Investment Management Policy 


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reference provided by the municipal officials as reference. This 
information is extracted daily and when doing uploadsfrom the 
bank is then credited against the clients' accounts or the 
correct vote number. 

(i) Accounts are also paid by means of a ACB (debit orders) 
payment by consumer's banker. 

(b) 3rd Parties 

Clients do a payment at Pick & Pay, Shoprite, SPAR, etcetera - refer to 
Annexure A. Up load's is done daily from external service provider 
extracting the information and then crediting the various clients' 
accounts. 

(c) Cheque Deposit (including cheques received via mail previously) 

The municipality will no longer accept any cheque payments as an 
official form of payment. This is due to various fraudulent activities 
associated with cheques and financial institutions moving towards a 
system whereby they will also no longer be accepting and/or issuing 
cheques. 

8. CONTROLS OVER MANAGEMENT OF CASH & INVESTMENT 

8.1 A proper record must be maintained of all investments made indicating at least the 
Institution, fund, interest rate, and maturing date. 

8.2 The Financial Officer must retain all quotations received for record and audit 
purposes. 

8.3 Interest must be correctly calculated, received and recorded timeously. 

8.4 All investment certificates to be received via email in order to be backed-up on the 
server and any hard copies received to be kept in a securities file which shall be 
safeguarded in a fire proof safe. 

8.5 In respect of grant funds, a separate file must be kept of the letter of grant and other 
pertinent information. Regular reports must be submitted to all grant agencies. 

8.6 The Chief Financial Officer must compile and will be responsible for the maintenance 
of an Investment Register complying with audit requirements. 

8.7 The Chief Financial Officer shall every month submit a report to the Council on the 


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Council's Investment portfolio, including the type of investment, interest rates, 
period of investment and summary of the exposures to particular financial 
institutions. 


9. DELEGATION OF AUTHORITY 

9.1 The Council may, in terms of Section 59 of the Municipal Systems Act 2000, delegate 
any of its functions and responsibilities in respect of this policy to a Committee of the 
Council, the Municipal Manager, the Chief Financial Officer or any political 
functionary of the Council provided that such delegation will not absolve the person 
to whom such a function or responsibility has been delegated from complying with 
any statutory reporting requirement or such reporting requirement as may be 
contained in this policy. 


10. SHORT TITLE 

10.1 This policy is called the Drakenstein Municipality Cash and Investment Policy. 


Cash & Investment Management Policy 


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ANNEXURE A: CONTRACTED 3RD PARTY VENDORS 

List of approved and contracted 3rd Party Vendors 

1. Municipal Accounts - 

Easy Pay receipting points at the following retail outlets 

(i) Pick n Pay; 

(ii) Shoprite / Checkers / Usave; 

(iii) SPAR; 

(iv) Woolworths; 

(v) Boxers; 

(vi) Top it Up; 

(vii) PEP Stores; 

(viii) Game; 

(ix) Lewis; 

(x) Saverite; and 

(xi) Cash & Carry. 

2. Traffic Fines - 

(a) Easy Pay receipting points; and 

(b) Syntell. 

3. Pre-paid Electricity - 

(a) Pre-paid Electricity Vendors; and 

(b) Prepaid 24 website. 


Cash & Investment Management Policy 




ANNEXURE B: PREFERRED LIST OF BANKING INSTITUTIONS 


List of currently approved Investees 
1. Deposit taking institutions - 



(a) 

ABSA Bank; 


(b) 

FirstRand Bank; 


(c) 

Investec Bank; 


(d) 

Nedbank; 


(e) 

Standard Bank; 


(f) 

Grindrod Bank; 


(g) 

Public Investment Commissioners; and 


(h) 

Corporation for Public Deposits. 

2. 

Corporate bond issuers - 


(a) 

None currently approved. 

3. 

Municipal bond issuers- 


(a) 

None currently approved. 

4. 

Endowment policy issuers - 


(a) 

None currently approved. 

5. 

National Government / Parastatals - 


(a) 

RSA fixed income stock; and 


(b) 

Eskom fixed income stock. 


Cash & Investment Management Policy 





DRAKENSTEIN 

MUNISIPALITEIT • MUNICIPALITY • UMASIPALA 
Paarl | Wellington | Gouda I Saron | Simondium 


Unauthorised, Irregular, 
Fruitless and Wasteful 
Expenditure Policy 


www.drakenstein.gov.za 


A city of excellence 





TABLE OF CONTENTS 


1. Purchase of the policy.3 

2. Definitions.3 

3. Legal framework.6 

4. Role of the accounting officer.7 

5. Procedure for unforeseen and unavoidable expenditure.8 

6. Examples ofunauthorised, irregular or fruitless and wasteful expenditure.9 

7. Process to be followed in cases of unauthorised, irregular or fruitless 

and wasteful expenditure.11 

8. Investigations and disciplinary actions.13 

9. Reporting.14 

10. Conclusion.15 

11. Short Title.15 


Unauthorised, Irregular, Fruitless and Wasteful Expenditure Policy- 

2 















1 . 


PURPOSE OF THE POLICY 


1.1 A policy for unauthorised, irregular, fruitless and wasteful expenditure must be compiled and 
adopted by municipalities to ensure compliance with Section 32 of the Municipal Finance 
Management Act, Act 56 of 2003 (MFMA) and MFMA Circular 68 dealing with unauthorised, 
irregular, fruitless and wasteful expenditure issued by National Treasury on 10 May 2013. 

1.2 The objectives of this policy are - 

(a) To state the regulatory and legislative requirements surrounding fruitless, wasteful and 
irregular expenditure. 

(b) To provide definitions of fruitless, wasteful and irregular expenditure. 

(c) To provide examples of fruitless, wasteful and irregular expenditure. 

(d) To outline procedures to manage such expenditures. 

(e) To inform officials of the consequences of not complying with the relevant regulatory and 
legislative requirements. 


2. DEFIIMITIONS 

2.1 In this Policy, unless the context otherwise indicates, a word or expression to which a meaning has 
been assigned in the Act has the same meaning as in the Act, and - 

2.1.1 "Department" means any internal department of the Drakenstein Municipality as per the 
latest approved Organisational Structure of Council; 

2.1.2 "Fruitless and wasteful expenditure" means expenditure that was made in vain and would 
have been avoided had reasonable care been exercised; 

2.1.3 "Irregular expenditure" in relation to a Municipality or municipal entity, means- 

(a) Expenditure incurred by a Municipality or municipal entity in contravention of, or 
that is not in accordance with, a requirement of this Act, and which has not been 
condoned in terms of section 170; 


Unauthorised, Irregular, Fruitless and Wasteful Expenditure Policy 


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(b) Expenditure incurred by a Municipality or municipal entity or in contravention of, 
or that is not in accordance with, a requirement of the Municipal Systems Act, and 
which has not been condoned in terms of that Act; 

(c) Expenditure incurred by a municipality in contravention of, or that is not in 
accordance with, a requirement of the Public Office-Bearers Act, 1998 (Act No. 20 
of 1998); or 

(d) Expenditure incurred by a Municipality or municipal entity in contravention of, or 
that is not in accordance with, a requirement of the supply chain management 
policy of the municipality or any of the municipality's by-laws giving effect to such 
policy, and which has not been condoned in terms of such policy or by-law, but 
excludes expenditure by a municipality which falls within the definition of 
"unauthorised expenditure"; 

2.1.4 "Municipality" means Drakenstein Municipality (DM); 

2.1.5 "Official" means any person employed by the Drakenstein Municipality, be it in the 
capacity as a permanent official, temporary official, intern or contracted employee (in 
terms of Section 57 of the Municipal Systems Act, Act 32 of 2000 or any other form of 
employment contract); 

2.1.6 "overspending" - 

(a) In relation to the budget of a municipality, means causing the operational or capital 
expenditure incurred by the municipality during financial year to exceed the total 
amount appropriated in that year's budget for its operational or capital 
expenditure as the case may be; 

(b) In relation to a vote, means causing expenditure under the vote to exceed the 
amount appropriated for that vote; or 

(c) In relation to expenditure under section 26, means causing expenditure under that 
section to exceed the limits allowed in subsection (5) of that section; 

2.1.7 "The Act" means the Municipal Finance Management Act, 2003 (Act No. 56 of 2003); 

2.1.8 "The POBA" means the Public Office-Bearers Act, 1998 (Act No. 20 of 1998); 

2.1.9 "Unforeseen and unavoidable expenditure" means expenditure that - 


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4 




(a) Could not have been foreseen at the time the annual budget of the municipality 
was passed; 

(b) The delay that will be caused by a pending adjustments budget may - 

(i) Result in significant financial loss for the municipality; 

(ii) Cause a disruption or suspension or serious threat to the continuation of 
municipal services; 

(iii) Lead to loss of life or serious injury or significant damage to property; and 

(iv) Obstruct the municipality from instituting or defending legal proceedings on 
an urgent basis; 

2.1.10 "Unauthorised expenditure" in relation to a municipality, means any expenditure 
incurred by a municipality otherwise than in accordance with section 15 or 11(3), and 
includes - 

(a) Overspending of the total amount appropriated in the municipality's approved 
budget; 

(b) Overspending of the total amount appropriated for a vote in the approved budget; 

(c) Expenditure from a vote unrelated to the department or functional area covered 
by the vote; 

(d) Expenditure of money appropriated for a specific purpose, otherwise than for that 
specific purpose; 

(e) Spending of an allocation referred to in paragraph (b), (c) or (d) of the definition of 
"allocation" otherwise than in accordance with any conditions of the allocation; or 

(f) A grant by the municipality otherwise than in accordance with the Act; 

2.1.11 "Vote" means- 

(a) One of the main segments into which a budget of a municipality is divided for the 
appropriation of money for the different department or functional areas of the 
municipality; and 


Unauthorised, Irregular, Fruitless and Wasteful Expenditure Policy 


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(b) Which specifies the total amount that is appropriated for the purposes of the 
department or the functional area concerned. 


3. LEGAL FRAMEWORK 

3.1 The following Laws and regulations, amongst others, inform this policy - 
3.1.1 Section 32 of the MFMA reading as follows - 

(1) Without limiting liability in terms of the common law or other legislation - 

(a) A political office-bearer of a municipality is liable for unauthorised 
expenditure if that office-bearer knowingly or after having been advised by 
the Accounting Officer of the municipality that the expenditure is likely to 
result in unauthorised expenditure, instructed an official of the municipality 
to incur the expenditure; 

(b) The Accounting Officer is liable for unauthorised expenditure deliberately 
or negligently incurred by the Accounting Officer, subject to subsection (3); 

(c) Any political office-bearer or official of a municipality who deliberately or 
negligently committed, made or authorised an irregular expenditure, is 
liable for that expenditure; or 

(d) Any political office-bearer or official of a municipality who deliberately or 
negligently made or authorised a fruitless and wasteful expenditure is liable 
for that expenditure. 

(2) A municipality must recover unauthorised, irregular or fruitless and wasteful 
expenditure from the person liable for that expenditure unless the expenditure - 

(a) In the case of unauthorised expenditure, is - 

(i) Authorised in an adjustments budget; or 

(ii) Certified by the municipal council, after investigation by a council 
committee, as irrecoverable and written off by the council; and 


Unauthorised, Irregular, Fruitless and Wasteful Expenditure Policy 


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(b) In the case of irregular or fruitless and wasteful expenditure, is, after 
investigation by a council committee, certified by the council as 
irrecoverable and written off by the council. 

(3) If the Accounting Officer becomes aware that the council, the mayor or the 
executive committee of the municipality, as the case may be, has taken a decision 
which, if implemented, is likely to result in unauthorised, irregular or fruitless and 
wasteful expenditure, the Accounting Officer is not liable for any ensuing 
unauthorised, irregular or fruitless and wasteful expenditure provided that the 
Accounting Officer has informed the council, the mayor or the executive 
committee, in writing, that the expenditure is likely to be unauthorised, irregular or 
fruitless and wasteful expenditure." 

3.1.2 Section 176 of the MFMA which reads as follows - 

(1) No municipality or any of its political structures, political office-bearers or officials, 
no municipal entity or its board of directors or any of its directors or officials, and 
no other organ of state or person exercising a power or performing a function in 
terms of this Act, is liable in respect of any loss or damage resulting from the 
exercise of that power or the performance of that function in good faith. 

(2) Without limiting liability in terms of the common law or other legislation, a 
municipality may recover from a political office-bearer or official of the 
municipality, and a municipal entity may recover from a director or official of the 
entity, any loss or damage suffered by it because of the deliberate or negligent 
unlawful actions of that political office-bearer or official when performing a 
function of office. 

3.1.3 Section 170 and 173 of the MFMA. 

3.1.4 Regulation 23 and 74 of the Municipal Budget and Reporting Regulations. 

3.1.5 Relevant GRAP Standards. 

4. ROLE OF THE ACCOUNTING OFFICER 

4.1 The Accounting Officer is responsible, amongst others, for the following - 


Unauthorised, Irregular, Fruitless and Wasteful Expenditure Policy 


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4.1.1 Exercise all reasonable care to prevent and detect irregular, unauthorised, fruitless and 
wasteful expenditure and must for this purpose implement effective, efficient and 
transparent processes of financial and risk management; 

4.1.2 Inform the Executive Mayor, Mayoral Committee and Council (in writing), as the case may 
be, if a decision istaken which, if implemented, is likelyto result in irregular, unauthorised, 
fruitless and wasteful expenditure; 

4.1.3 On discovery of any irregular, unauthorised, fruitless and wasteful expenditure to report 
promptly (in writing), the particulars of the expenditure to the Executive Mayor; and 

4.1.4 Follow the prescribed processes to deal with irregular, unauthorised, fruitless, and 
wasteful expenditure. 


5. PROCEDURE FOR UNFORESEEN AND UNAVOIDABLE EXPENDITURE 

5.1 DM hereby adopts the MFMA Budget and Reporting Regulations' prescribed processes to be 

followed for the approval of unforeseeable and unavoidable expenditure as set out below - 

(a) No unavoidable expenditure exceeding R15 million may be approved during a financial 
year. 

(b) Any official / department becoming aware of the need to incur unforeseen or unavoidable 
expenditure must immediately approach the Chief Financial Officer with the full details on 
the unforeseen expenditure, providing information on the consequences of not incurring 
the expenditure as well as an indication of the expected cost (both for the current year as 
well as any recurring cost resulting from the event). A confirmation that the expenditure 
does not constitute expenditure that may not be allowed by the Executive Mayor as per 
section 73(2) of the MFMA Budget and Reporting Regulations must be given by the 
department when approaching the CFO. 

(c) The Chief Financial Officer will determine whether the cost cannot be dealt with through a 
process of shifting of funds within the relevant votes in terms of the virements policy. If 
sufficient funds are available, the virements process will be followed. If not, the matter will 
be reported to the City Manager for consideration as unforeseen and unavoidable 
expenditure. 

(d) Once the City Manager has granted approval, the relevant Executive Director will 
be authorised to submit a report to the Executive Mayor requesting approval. If approval 


Unauthorised, Irregular, Fruitless and Wasteful Expenditure Policy 


8 




is granted, the financial system will be adjusted to allow the department to process the 
financial transaction. 

(e) The abovementioned process will be dealt with as highest priority to ensure that 
administrative delays do not exacerbate the situation. 

(f) An adjustments budget will be submitted to the next Council meeting. The preferred 
process would be to shift funds between votes to avoid any negative impact on the total 
cash position of Council. 


6. EXAMPLES OF UNAUTHORISED, IRREGULAR OR FRUITLESS AND WASTEFUL EXPENDITURE 

6.1 The following examples are only guides and are not exhaustive. 

6.2 Fruitless and wasteful expenditure 

(a) Fruitless and wasteful expenditure is expenditure that was made in vain and would have 
been avoided had reasonable care been exercised. Fruitless and wasteful expenditure is 
accounted for as expenditure in the Statement of Financial Performance and where 
recovered, it is subsequently accounted for as revenue in the Statement of Financial 
Performance. 

(b) Fruitless and wasteful expenditure in DM includes the following - 

(i) Procuring of goods and services that are not beneficial to the municipality; 

(ii) Costs of goods and services are in excess of what would have been the case have 
proper procedures been followed (quotes etcetera); 

(iii) Renting of property when sufficient and appropriate unoccupied property is owned 
by the municipality; 

(iv) Exuberant costs on parties, entertainment, etcetera; 

(v) Incurring penalty and interest costs on late payment of accounts; and 

(vi) Mismanagement of funds. 


Unauthorised, Irregular, Fruitless and Wasteful Expenditure Policy 


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6.3 Irregular expenditure 


(a) Irregular expenditure in DM is expenditure that is contrary to the Municipal Finance 
Management Act (Act No.56 of 2003), the Municipal Systems Act (Act No.32 of 2000), and 
the Public Office Bearers Act (Act No. 20 of 1998) or is in contravention of the 
municipality's Supply Chain Management Policy. Irregular expenditure excludes 
unauthorised expenditure. Irregular expenditure is accounted for as expenditure in the 
Statement of Financial Performance and where recovered, it is subsequently accounted for 
as revenue in the Statement of Financial Performance. 

(b) Irregular expenditure in DM includes the following - 

(i) Irregular expenditure incurred as a result of institutions procuring goods or services 
by means other than through competitive bids and where reasons for deviating 
from inviting competitive bids have not been recorded and approved by the 
Accounting Officer; 

(ii) Irregular expenditure incurred as a result of non-compliance with a requirement of 
the municipality's delegations of authority; 

(iii) Irregular expenditure incurred due to it being in contravention of the municipality's 
Supply Chain Management Policy; 

(iv) Irregular expenditure incurred in favour of service providers who are in the service 
of state; and 

(v) Irregular expenditure incurred as a result of non-compliance with a provision 
contained in any applicable legislation. 

6.4 Unauthorised expenditure 

(a) Unauthorised expenditure in DM is expenditure that has not been budgeted for, 
expenditure that is not in terms of the conditions of an allocation received from another 
sphere of government, entity or organ of state and expenditure in the form of a grant that 
is not permitted in terms of the Municipal Finance Management Act (Act No.56 of 2003). 
Unauthorised expenditure is accounted for as an expense in the Statement of Financial 
Performance and where recovered, it is subsequently accounted for as revenue in the 
Statement of Financial Performance. 

(b) Unauthorised expenditure in DM includes the following - 


Unauthorised, Irregular, Fruitless and Wasteful Expenditure Policy 


10 




(i) Procuring of goods and services that are not budgeted for; 

(ii) Expenditure not in terms of the conditions of an allocation (grants, etcetera) 
received from another sphere of government, entity or organ of state; and 

(iii) Expenditure in the form of a grant that is not permitted in terms of the MFMA. 

7. PROCESS TO BE FOLLOWED IN CASES OF UNAUTHORISED, IRREGULAR OR FRUITLESS AND 
WASTEFUL EXPENDITURE 

7.1 Any unauthorised, irregular or fruitless and wasteful expenditure as defined above must be 
promptly reported to the Chief Financial Officer who will initiate the process of dealing with the 
unauthorised, irregular or fruitless and wasteful expenditure. 

7.2 A register will be maintained by the Manager: Supply Chain Management to record all instances 
of unauthorised, irregular, fruitless and wasteful expenditure. The format of the register will be 
consistent with Annexure A of MFMA Circular 68 issued on 10 May 2013. 

7.3 Upon receiving a report of unauthorised, irregular or fruitless and wasteful expenditure, the CFO 
will advise, in writing, the City Manager and the Chief Audit Executive (CAE). 

7.4 The CAE will institute an investigation as contemplated in section 32 of the MFMA, and in 
particular, determine the following - 

(a) Nature of the non-compliance (i.e. non-compliance with MFMA, MSA, Remuneration of 
Public Officer Bearer's Act, etcetera); 

(b) Nature and reason for the unauthorised expenditure, irregular or fruitless and wasteful 
expenditure; 

(c) Whether the unauthorised, irregular or fruitless and wasteful expenditure was as a result 
of an instruction given, and if so, by whom. In addition, whether the Accounting Officer or 
official involved advised that such a decision would result in unauthorised, irregular or 
fruitless and wasteful expenditure; 

(d) Whether the irregular expenditure result from a minor breach in the procurement policy; 

(e) Whether the municipality suffered a financial loss; 


Unauthorised, Irregular, Fruitless and Wasteful Expenditure Policy 


11 




(f) Whether the Accounting Officer / official / public officer bearer acted deliberately, 
negligently, orgrossly negligently; 

(g) Grounds shown as to why the unauthorised expenditure should be authorised (such as 
interest ofthe municipality); 

(h) Whether the Accounting Officer can condone the non-compliance with the SCM policy as 
a minor breach; 

(i) Whether the non-compliance must be submitted to the National Treasury for 
condonation; and 

(ij) Whether the non-compliance must be submitted to the Minister of Co- operative 
Governance and Traditional Affairs for condonation. 

7.5 The findings of the CAE will be submitted to the City Manager for consideration of the following - 

(a) Introduction of an adjustments budget to authorise the un-authorised expenditure (if 
unforeseen and unavoidable and the process outlined in paragraph 3 of this policy could 
not be followed); 

(b) Recommendation to recover funds; 

(c) Recommendation to write-off the funds as irrecoverable; or 

(d) Disciplinary / Criminal action to be instituted. 

7.6 The CAE must, in considering the above, take due cognisance of section 176 of the MFMA. 

7.7 The City Manager must advise the Executive Mayor of the unauthorised, irregular or fruitless and 
wasteful expenditure and the recommendations that will be made to the Municipal Public 
Accounts Committee (MPAC). 

7.8 The Executive Director: Corporate Services will be responsible to institute criminal charges where 
applicable. 

7.9 The findings of the CAE and the recommendations of the City Manager will be submitted to MPAC 
for consideration of the following - 


Unauthorised, Irregular, Fruitless and Wasteful Expenditure Policy 


12 




(a) Introduction of an adjustments budget to authorise the un-authorised expenditure (if 
unforeseen and unavoidable and the process outlined in paragraph 3 of this policy could 
not be followed); 

(b) Recommendation to recover funds; or 

(c) Recommendation to write-off the funds as irrecoverable. 

7.10 The recommendations of MPAC will be submitted to the next Executive Mayor and Mayoral 
Committee and to Council for final decision. 

7.11 Upon conclusion of the Council process, the Chief Financial Officer must promptly advise the MEC 
for Local Government and the Auditor General of the unauthorised, irregular or fruitless and 
wasteful expenditure and the decision taken by Council. 

7.12 If the unauthorised expenditure is not authorised by Council, the funds must be recovered from 
the liable official or political officer bearer (within 30 days or in reasonable instalments). 

7.13 The Register of unauthorised, irregular or fruitless and wasteful expenditure will form part of the 
City Manager's management meeting agenda to ensure the reported items are dealt with in a 
prompt manner. 

7.14 All instances of unauthorised, irregular, fruitless and wasteful expenditure must be disclosed in 
the annual financial statements and the annual report. 

7.15 The Chief Financial Officer must initiate a special adjustments budget (if applicable) to deal with 
the authorisation of unauthorised expenditure. 

8. INVESTIGATIONS AND DISCIPLINARY ACTIONS 

8.1 In terms section 172 and 173 of the MFMA, an Accounting Officer is guilty of financial misconduct 
and an offence respectively if he or she - 

(a) Wilfully or negligently fails to take effective and appropriate steps to prevent unauthorised, 
irregular or fruitless and wasteful expenditure as required by the MFMA; 

(b) Fails to take effective and appropriate disciplinary steps against an official in the 
department who makes or permits unauthorised, irregular or fruitless and wasteful 
expenditure; and 


Unauthorised, Irregular, Fruitless and Wasteful Expenditure Policy 


13 




(c) Fails to report unauthorised, irregular or fruitless and wasteful expenditure in terms of the 
MFMA. 

8.2 As soon as the Accounting Officer becomes aware of an allegation of financial misconduct against 
an official, the Accounting Officer has a responsibility to ensure that he / she initiates an 
investigation into the matter and if the allegations are confirmed, holds a disciplinary hearing in 
accordance with the prescripts of the applicable legislation. 

8.3 In terms of section 172 of the MFMA, an official of a department to whom a duty or power has 
been assigned commits an act of financial misconduct if that official wilfully or negligently fails to 
perform that duty or exercise that power in line with applicable legislation. 

8.4 In terms of the MFMA, the Accounting Officer must take appropriate and effective disciplinary 
steps against an official who makes or permits unauthorised, irregular or fruitless and wasteful 
expenditure. 

8.5 When an Accounting Officer determines the appropriateness of disciplinary steps against an 
official in terms of applicable legislation, he or she must take into account the following - 

(a) Circumstances of the transgression; 

(b) Extent of the expenditure involved; and 

(c) Nature and seriousness of the transgression 

9. REPORTING 

9.1 The Accounting Officer must comply with the following reporting requirements - 

(a) Immediately upon discovery of unauthorised, irregular or fruitless, and wasteful 
expenditure, the Accounting Officer must report the details of the unauthorised, irregular 
or fruitless, and wasteful expenditure to the Executive Mayor. 

(b) The report must include the following details - 

(i) Amount of the unauthorised, irregular or fruitless and wasteful expenditure; 

(ii) Name of the vote from which the expenditure was made; 


Unauthorised, Irregular, Fruitless and Wasteful Expenditure Policy 


14 




(iii) Reason why the unauthorised, irregular or fruitless and wasteful expenditure could 
not be avoided; 

(iv) Name and title of the responsible official; 

(v) Details of any recovery steps taken or to be taken by the municipality; and 

(vi) Details of any disciplinary steps taken or to be taken by the municipality. 

(c) All unauthorised, irregular or fruitless and wasteful expenditure must be reported as a note 
to the annual financial statements. 


10. CONCLUSION 

10.1 Irregular expenditure resulting from non-compliance with the MFMA and the MSA can't be 
condoned by Council and approval must be sought from the National Treasury and the Minister of 
Co-operative Governance and Traditional Affairs respectively. 

10.2 Irregular expenditure resulting from non-compliance with the Public Officer Bearer's Act can't be 
condoned and such irregular expenditure must be recovered from the political officer bearer 
concerned. 

10.3 A council may condone irregular expenditure resulting from a contravention of the SCM policy 
provided that the contravention is not also a contravention of the MFMA or the SCM Regulations, 
in which case only the National Treasury can condone a contravention of the SCM Regulations. 

10.4 Minor breaches of the procurement process can be ratified by the Accounting Officer (if the 
municipality's SCM policy allows for it). Only the breaches in the process can be ratified and not 
the irregular expenditure itself. The irregular expenditure must still be ratified by Council. 

11. SHORT TITLE 

11.1 This policy is called the Drakenstein Municipality Unauthorised, Irregular, Fruitless and Wasteful 
Expenditure Policy. 


Unauthorised, Irregular, Fruitless and Wasteful Expenditure Policy 


15 





DRAKENSTEIN 

MUNISIPALITEIT • MUNICIPALITY • UMASIPALA 
Paarl | Wellington | Gouda I Saron | Simondium 


Supply Chain 
Management Policy 


www.drakenstein.gov.za 


A city of excellence 





TABLE OF CONTENTS 


1. Definitions 

CHAPTER 1 

IMPLEMENTATION OF SUPPLY CHAIN MANAGEMENT POLICY 

2. Supply chain management policy 

3. Amendment of supply chain management policy 

4. Delegation of supply chain management powers and duties 

5. Sub-delegations 

6. Oversight role of council 

7. Supply chain management units 

8. Training of supply chain management officials 

CHAPTER 2 

SUPPLY CHAIN MANAGEMENT SYSTEM 

9. Format of supply chain management system 

Part 1: Demand management 

10. System of demand management 

Part 2: Acquisition management 

11. System of acquisition management 

12. Range of procurement processes 


Supply Chain Management Policy 


2 




13. General preconditions for consideration of written quotations or bids 

14. Lists of accredited prospective providers 

15. Petty cash purchases 

16. Written or verbal quotations 

17. Formal written price quotations 

18. Procedures for procuring goods or services through written or verbal quotations and 
formal written price quotations 

19. Competitive bidding process 

20. Process for competitive bidding 

21. Bid documentation for competitive bids 

22. Public invitation for competitive bids 

23. Procedure for handling, opening and recording of bids 

24. Negotiations with preferred bidders 

25. Two-stage bidding process 

26. Committee system for competitive bids 

27. Bid Specifications Committees 

28. Bid Evaluation Committees 

29. Bid Adjudication Committees 

30. Procurement of banking services 

31. Procurement of IT related goods or services 

32. Procurement of goods and services under contracts secured by other organs of state 

33. Procurement of goods necessitating special safety arrangements 

34. Proudly SA Campaign 

35. Appointment of consultants 

36. Deviation from and ratification of minor breaches of procurement processes 

37. Unsolicited bids 

38. Combating of abuse of supply chain management system 


Supply Chain Management Policy 


3 




Part 3: Logistics, Disposal, Risk and Performance Management 


39. Logistics management 

40. Disposal management 

41. Risk management 

42. Performance management 

Part 4: Other matters 

43. Prohibition on awards to persons whose tax matters are not in order 

44. Prohibition on awards to persons in the service of the state 

45. Awards to close family members of persons in the service of the state 

46. Ethical standards 

47. Inducements, rewards, gifts and favours 

48. Sponsorships 

49. Objections and complaints 

50. Resolution of disputes, objections, complaints and queries 

51. Contracts providing for compensation based on turnover 

52. Contract management 

53. Contract having budgetary implications beyond three years 

54. Amendment of contracts 

55. Right of appeal 

56. Notification of bid decisions 

57. Unsuccessful bidder debriefing 

58. Condonation of Policy contraventions 

59. Short title 


Supply Chain Management Policy 


4 




1 . 


Definitions 


1.1 In this Policy, unless the context otherwise indicates, a word or expression to 
which a meaning has been assigned in the Act has the same meaning as in 
the Act, and - 


1.1.1 "Act" means the Municipal Finance Management Act, No. 56 of 2003; 

1.1.2 "Bid" means a written offer in a prescribed or stipulated form in 
response to an invitation by the municipality for the provision of 
goods, services or construction works through price quotations, 
advertised competitive bidding process or proposals; 

1.1.3 "Bidder" means any person submitting a competitive bid or a 
quotation; 

1.1.4 "Closing time" means the time and day specified in the bid 
documents for the receipt of bids; 

1.1.5 "Competitive bidding process" means a competitive bidding process 
referred to in paragraph 12(2)(b)(iii) of this Policy; 

1.1.6 "Competitive bid" means a bid in terms of a competitive bidding 
process; 

1.1.7 "Contract" means the agreement which is concluded when the 
municipality accepts, in writing, a competitive bid or quotation 
submitted by a supplier; 

1.1.8 "Contract manager" means an official of the Municipality who is 
responsible for the planning for the planning and execution of a 
transaction involving the procurement of goods, services or works. 

1.1.9 "Contractor" means any person or entity whose competitive bid or 
quotation has been accepted by the municipality; 

1.1.10 "Delegated authority" means any person or committee delegated 
with authority by the municipality in terms of the provisions of the 
Municipal Finance Management Act; 


Supply Chain Management Policy 


5 




1.1.11 "Department" means a section within a specificdirectorate in terms 
of the municipal organigram; 

1.1.12 "Electronic format" means a bid submitted by a bidder via email or 
made available through a cloud storage service; 

1.1.13 "Emergency dispensation" means emergency as referred to in 

paragraph 36(l)(a)(i) of this policy under which one or more of the 
following is in existence that warrants an emergency dispensation; 


(a) The possibility of human injury or death; 

(b) The prevalence of human suffering or deprivation of rights; 

(c) The possibility of damage to property, or suffering and death of 
livestock and animals; 

(d) The interruption of essential services, including transportation 
and communication facilities or support services critical to the 
effective functioning of the municipality as a whole; 

(e) The possibility of serious damage occurring to the natural 
environment; 

(f) The possibility that failure to take necessary action may result in 
the municipality not being able to render an essential 
community service; 

(g) The possibility that the security of the state could be 
compromised; or 

(h) The prevailing situation, or imminent danger, should be of such 
a scale and nature that it could not readily be alleviated by 
interim measures, in order to allow time for the formal 
procurement process. Emergency dispensation shall not be 


Supply Chain Management Policy 


6 




granted in respect of circumstances other than those 
contemplated above. 


1.1.14 "Final award" in relation to bids or quotations submitted for a 
contract, means the final decision on which a bid or quote is 
accepted in terms of the delegated powers as per the System of 
Delegations; 


1.1.15 "Formal written price quotation" means quotations referred to in 

paragraph 12 (1) (d) of this Policy; 

1.1.16 "Green procurement" means the procurement of environmentally 

friendly products and services; 

1.1.17 "in the service of the state" means to be - 


(a) Amemberof- 

(i) Any municipal council; 

(ii) Any provincial legislature; or 

(iii) The National Assembly or the National Council of 
Provinces; 

(b) A member of the board of directors of any municipal entity; 

(c) An official of any municipality or municipal entity; 

(d) An employee of any national or provincial department, national 
or provincial public entity or constitutional institution within the 
meaning of the public Finance Management Act, 1999 (Act No.l 
of 1999); 


Supply Chain Management Policy 


7 




(e) A member of the accounting authority of any national or 
provincial 

public entity; or 

(f) An employee of Parliament or a provincial legislature; 


1.1.18 "Long term contract" means a contract with a duration period 
exceeding one year and does not have the same meaning as contracts 
of a long term nature referred to in paragraph 22(l)(b)(vi)of this policy; 


1.1.19 "Long term nature contract" means a contract as defined by section 
33(1) of the Municipal Finance Management Act imposing financial 
obligations on the Municipality beyond the first three years covered in 
the approved annual budget; 

1.1.20 "List of accredited prospective providers" means the list of accredited 
prospective providers, which the Drakenstein Municipality must keep 
in terms of paragraph 14 of this policy; 

1.1.21 "Other applicable legislation" means any other legislation applicable 
to municipal supply chain management, including but not limited to the 
following: 

(a) The Preferential Procurement Policy Framework Act; 

(b) The Broad-Based Black Economic Empowerment Act; smd- 

(c) The Construction Industry Development Board Act; 

(d) The Local Government: Municipal Systems Act; 

(e) The Competition Act; and 

(f) The Promotion of Administrative Justice Act. 


Supply Chain Management Policy 


8 




1.1.22 "Policy" means the Supply Chain Management Policy of Drakenstein 
municipality as amended from time to time; 


1.1.23 "Parent municipality" has the meaning assigned to it in section 1 of 

the Municipal Systems Act; 

1.1.24 "Petty Cash" means the procurement of goods and services through 

the supply chain management requisition and order system by 
means of one verbal and written quotation below a determined 
amount; 

1.1.25 "Single source" refers to when the competition exist in the market, 

but from a selected few suppliers due to technical capabilities and 
abilities comply with the requirements of the municipality; 

1.1.26 "Sole Supplier" It refers in instances where there is no competition 
and only one service provider exist in the market, with sole 
distribution rights and/or patent rights or manufacturer; 


1.1.27 "Strip and quote" When the repairs and maintenance on our 

machines, vehicles are done by one supplier and/or strip-and- 
quote, for example a municipal vehicle that needs repairs enters the 
workshop, however to do the repairs, the vehicle has to be send to 
a supplier that determines what repairs should be done; 

1.1.28 "Supplier database" means the list of accredited prospective 

providers which the municipality or municipal entity must keep in 
terms of the Regulation 14 of the Supply Chain Management 
Regulations; 

1.1.29 "Technical expert" means an executive director or his representative 
that serves as a member of the Bid Adjudication Committee whom 
must be present at the Bid Adjudication Committee when an item is 
considered from his/her department; 

1.1.30 "Treasury guidelines" means any guidelines on supply chain 

management issued by the Minister in terms of section 168 of the 
Act; 


Supply Chain Management Policy 


9 




1.1.31 "Trust" means the agreement through which the property of one 

person is made over or bequeathed to a trustee to administer such 
property for the benefit of another person; 

1.1.32 "Trustee" means any person, includingthefounder of a trust, to whom 

property is bequeathed in order for such property to be 
administered for the benefit of another person; 

1.1.33 "The Regulations" means the Local Government: Municipal Finance 

Management Act, 2003, Municipal Supply Chain Management 
Regulations published by Government Notice 868 of 2005; 

1.1.34 "The PPPF Regulations" means the Preferential Procurement Policy 

Regulations, 2017 published under Government Notice R.32 in 
Government Gazette 40553 of 20 January 2017; and 

1.1.35 "Written or verbal quotations" means quotations referred to in 

paragraph 12(l)(b) & (c) of this Policy. 


CHAPTER 1 


IMPLEMENTATION OF SUPPLY CHAIN MANAGEMENT POLICY 


2. Supply chain management policy 


(1) All officials and other role players in the supply chain management system of 
the Drakenstein Municipality must implement this Policy in a way that - 

(a) Gives effect to - 


(i) Section 217 of the Constitution; and 


(ii) Part 1 of Chapter 11 and other applicable provisions of the Act; 


Supply Chain Management Policy 


10 




(b) Is fair, equitable, transparent, competitive and cost effective; 

(c) Complies with - 

(i) The Regulations; and 

(ii) Any minimum norms and standards that may be prescribed in 
terms of section 168 of the Act; 

(d) Is consistent with other applicable legislation; 

(e) Does not undermine the objective for uniformity in supply chain 
management systems between organs of state in all spheres; and 

(f) Is consistent with national economic policy concerning the promotion 
of investments and doing business with the public sector. 


(2) The municipal entity must, in addition to complying with subparagraph (1), 
apply this Policy, to the extent determined by the parent municipality, in a 
way that is consistent with the supply chain management policy of the parent 
municipality. 


(3) This Policy applies when the Drakenstein Municipality - 


(a) Procures goods or services; 

(b) Disposes goods no longer needed; 

(c) Selects contractors to provide assistance in the provision of municipal 
services otherwise than in circumstances where Chapter 8 of the 
Municipal Systems Act applies; or 


Supply Chain Management Policy 


11 




(d) Selects external mechanisms referred to in section 80(l)(b) of the 
Municipal Systems Act for the provision of municipal services in 
circumstances contemplated in section 83 of that Act. 


(4) This Policy, except where provided otherwise, does not apply in respect of 
the procurement of goods and services contemplated in section 110(2) of the 
Act, including- 


(a) Water from the Department of Water Affairs or a public entity, 
another municipality or a municipal entity; and 

(b) Electricity from Eskom or another public entity, another municipality 
or a municipal entity. 


3. Amendment of the supply chain management policy 


(1) The Accounting Officer must - 

(a) At least annually review the implementation of this Policy; and 

(b) When the Accounting Officer considers it necessary, submit proposals 
for the amendment of this Policy to the Drakenstein Council. 

(2) If the Accounting Officer submits proposed amendments to the Drakenstein 
Council that differs from the model policy issued by the National Treasury, 
the Accounting Officer must - 


(a) Ensure that such proposed amendments comply with the Regulations; 
and 

(b) Report any deviation from the model policy to the National Treasury 
and the relevant provincial treasury. 


Supply Chain Management Policy 


12 




(3) When amending this supply chain management policy the need for 
uniformity in supply chain practices, procedures and forms between organs 
of state in all spheres, particularly to promote accessibility of supply chain 
management systems for small businesses must be taken into account. 


4. Delegation of supply chain management powers and duties 


(1) The Drakenstein Council hereby delegates all powers and duties to the 
Accounting Officer, which are necessary to enable the Accounting Officer - 

(a) To discharge the supply chain management responsibilities conferred 
on Accounting Officers in terms of- 

(i) Chapter 8 or 10 of the Act; and 

(ii) This Policy; 

(b) To maximize administrative and operational efficiency in the 
implementation of this Policy; 

(c) To enforce reasonable cost-effective measures for the prevention of 
fraud, corruption, favouritism and unfair and irregular practices in the 
implementation of this Policy; and 

(d) To comply with his or her responsibilities in terms of section 115 and 
other applicable provisions of the Act. 

(2) Sections 79 and 106 of the Act apply to the sub-delegation of powers and 
duties delegated to an Accounting Officer in terms of subparagraph (1). 

(3) The Accounting Officer may not sub-delegate any supply chain management 
powers orduties to a person who is not an official of Drakenstein Municipality 
or to a committee, which is not exclusively composed of officials of the 
Drakenstein Municipality. 


Supply Chain Management Policy 


13 




(4) This paragraph may not be read as permitting an official, to whom the power 
to make final awards has been delegated, to make a final award in a 
competitive bidding process otherwise than through the committee system 
provided for in paragraph 26 of this Policy. 

5. Sub-delegations 


(1) The Accounting Officer may in terms of section 79 or 106 of the Act sub- 
delegate any supply chain management powers and duties, including those 
delegated to the Accounting Officer in terms of this Policy, but any such sub- 
delegation must be consistent with subparagraph (2) of this paragraph and 
paragraph 4 of this Policy. 

(2) The power to make a final award - 

(a) Above R 10 million (VAT included) may not be sub-delegated by the 
Accounting Officer; 

(b) Above R 200,000 (VAT included), but not exceeding R 10 million (VAT 
included), may be sub-delegated but only to - 

(i) The Bid Adjudication Committee of which the Chief Financial 
Officer or a senior manager is a member; or 

(ii) Accounting Officerof the municipality, afterdue consideration 
of all facts was done; and 

(c) Below R 200,000 (VAT included) to be disposed by delegated official 
according approved delegatory power and functions issued by 
Accounting Officer. 

(3) The Bid Adjudication Committee to which the power to make final awards 
has been sub-delegated in accordance with subparagraph (2) must within five 
days of the end of each month submit to the official referred to in 
subparagraph (4) a written report containing particulars of each final award 
made by such official or committee during that month, including - 


Supply Chain Management Policy 


14 




(a) The amount of the award; 


(b) The name of the person to whom the award was made; and 

(c) The reason why the award was made to that person. 

(4) A written report referred to in subparagraph (3) must be submitted - 

(a) To the Accounting Officer, in the case of an award by - 

(i) The Bid Adjudication Committee of which the Chief Financial 
Officer or a senior manager is a member; or 

(b) To the Chief Financial Officer or the senior manager responsible for 
the relevant bid, in the case of an award by - 

(i) The Bid Adjudication Committee of which the Chief Financial 
Officer or a senior manager is not a member. 

(5) Subparagraphs (3) and (4) of this policy do not apply to procurements out of 
petty cash. 

(6) This paragraph may not be interpreted as permitting an official to whom the 
power to make final awards has been sub-delegated, to make a final award 
in a competitive bidding process otherwise than through the committee 
system provided for in paragraph 26 of this Policy. 

(7) No supply chain management decision-making powers may be delegated to 
an advisor or consultant. 


6. Oversight role of council 


Supply Chain Management Policy 


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(1) The Drakenstein Council reserves its right to maintain oversight over the 
implementation of this Policy. 

(2) For the purposes of such oversight the Accounting Officer must - 

(i) Within 30 days of the end of each financial year, submit a report on 
the implementation of this Policy and the supply chain management 
policy of any municipal entity under the sole or shared control of the 
municipality, to the council of the municipality; and 

(ii) Whenever there are serious and material problems in the 
implementation of this Policy, immediately submit a report to Council. 

(3) The Accounting Officer must, within 10 days of the end of each quarter, 
submit a report on the implementation of the supply chain management 
policy to the Executive Mayor. 

(4) The reports must be made public in accordance with section 21A of the 
Municipal Systems Act. 


7. Supply chain management unit 


(1) A supply chain management unit is hereby established to implement this 
Policy. 

(2) The supply chain management unit operates under the direct supervision of 
the Chief Financial Officer or an official to whom this duty has been delegated 
in terms of section 82 of the Act. 


8. Training of supply chain management officials 


Supply Chain Management Policy 


16 




(1) The training of officials involved in implementing this Policy should be in 
accordance with any Treasury guidelines on supply chain management 
training. 

CHAPTER2 

SUPPLY CHAIN MANAGEMENT SYSTEM 

9. Format of supply chain management system 

(1) This Policy provides systems for - 

(i) Demand management; 

(ii) Acquisition management; 

(iii) Logistics management; 

(iv) Disposal management; 

(v) Risk management; and 

(vi) Performance management. 


Part 1: Demand management 


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10. System of demand management 


(1) The Accounting Officer must establish and implement an appropriate 
demand management system in order to ensure that the resources required 
by Drakenstein Municipality support its operational commitments and its 
strategic goals outlined in the Integrated Development Plan. 

(2) The demand management system must - 

(a) Include timely planning and management processes to ensure that all 
goods and services required by Drakenstein Municipality are 
quantified, budgeted for and timely and effectively delivered at the 
right locations and at the critical delivery dates, and are of the 
appropriate quality and quantity at a fair cost; 

(b) Take into account any benefits of economies of scale that may be 
derived in the case of acquisitions of a repetitive nature; 

(c) Provide for the compilation of the required specifications to ensure 
that its needs are met; and 

(d) To undertake appropriate industry analysis and research to ensure 
that innovations and technological benefits are maximized. 

(3) Green procurement must be incorporated as far as reasonably possible for all 
specifications of goods, services and construction works. 

(4) In the development of bid specifications, innovative mechanisms should be 
explored to renderthe service or product more resource and energy efficient. 


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Part 2: Acquisition management 


11. System of acquisition management 

(1) The Accounting Officer must implement the system of acquisition management 
set out in this Part in order to ensure - 

(a) That goods and services are procured by Drakenstein Municipality in 
accordance with authorised processes only; 

(b) That expenditure on goods and services is incurred in terms of an 
approved budget in terms of section 15 of the Act; 

(c) That the threshold values for the different procurement processes are 
complied with; 

(d) That bid documentation, evaluation and adjudication criteria, and 
general conditions of a contract, are in accordance with any applicable 
legislation; and 

(e) That anyTreasury guidelines on acquisition management are properly 
taken into account. 

(2) When procuring goods or services contemplated in section 110(2) of the Act, 
the Accounting Officer must make public the fact that such goods or services 
are procured otherwise than through the Drakenstein Municipality supply 
chain management system, including- 

(a) The kind of goods or services; and 

(b) The name of the supplier. 

(3) The Accounting Officer may on motivation of an Executive Director extend 
the bid closing date, if circumstances justify the action, provided that the 
closing date may not be extended unless a notice is published by the 


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Manager: Supply Chain Management in the same newspapers as the original 
advertisement as well as the website, prior to the original bid closing date. All 
prospective bidders must also be informed in writing by the relevant 
Executive Director of the extension of the bid closing date. 


(4) Unless otherwise indicated in the bid documents, the Municipality shall not 
be liable for any expenses incurred by prospective bidders in the preparation 
and / or submission of a bid or quotation. 

12. Range of procurement processes 


(1) Goods and / or services may only be procured by way of - 

(a) Cash purchases administered by the Expenditure Division up to a 
transaction value as defined in Council's Petty Cash Policy; 

(b) Petty cash purchases through one verbal and written quotation for 
the procurement of goods through the supply chain management 
requisition and order system of a transaction value between RO and 
R2,000 (VAT included); 

(c) Written or verbal quotations for procurement of goods and/or 
services of a transaction value between R2,000 and R10,000 (VAT 
included); 

(d) Formal written quotations for procurement of goods and/or services 
of a transaction value between R10,000 and R200,000 (VAT included; 

(e) Procurements above a transaction value of R200,000 (VAT included); 
and 

(f) The procurement of long-term contracts. 

(2) The Accounting Officer may, in writing- 


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(a) Lower, but not increase, the different threshold values specified in 

subparagraph (1); or 

(b) Directthat- 

(i) Written quotations are obtained for any specific procurement 
of a transaction value lower than R2,000; 

(ii) Written price quotations be obtained for any specific 
procurement of a transaction value lower than R10,000; or 

(iii) A competitive bidding process be followed for any specific 
procurement of a transaction value higher than R200,000. 

(3) Goods or services may not deliberately be split into parts or items of a lesser 
value merely to avoid complying with the requirements of the policy. When 
determining transaction values, a requirement for goods or services 
consisting of different parts or items must as far as possible be treated and 
dealt with as a single transaction. 


13. General preconditions for consideration of written quotations or bids 


(1) A written quotation or bid may not be considered unless the provider who 
submitted the quotation or bid - 

(a) Has furnished that provider's - 


(i) Full name; 


(ii) Identification number or company or other registration 
number; and 

(iii) Tax reference number and VAT registration number, if any; 


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(b) Has authorised the Drakenstein Municipality to obtain a tax clearance, 
if applicable from the South African Revenue Services that the 
provider's tax matters are in order; and 

(c) Has indicated - 

(i) Whether he or she is in the service of the state, or has been in 
the service of the state in the previous twelve months; 

(ii) If the provider is not a natural person, whether any of its 
directors, managers, principal shareholders or stakeholder is 
in the service of the state, or has been in the service of the 
state in the previous twelve months; or 

(iii) Whether a spouse, child or parent of the provider or of a 
director, manager, shareholder or stakeholder referred to in 
subparagraph (ii) is in the service of the state, or has been in 
the service of the state in the previous twelve months. 


14. Lists of accredited prospective providers 


(1) The Accounting Officer must - 


(a) Keep a list of accredited prospective providers of goods and services 
that must be used for the procurement requirements through written 
or verbal quotations and formal written price quotations; 

(b) At least once a yearthrough newspapers commonly circulating locally, 
the website and any other appropriate ways, invite prospective 
providers of goods or services to apply for evaluation and listing as 
accredited prospective providers; 

(c) Specify the listing criteria for accredited prospective providers as 
stated within the database registration forms; and 


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(d) Disallow the listing of any prospective provider whose name appears 
on the National Treasury's database as a person prohibited from 
doing business with the public sector. 


(2) The list must be updated at least quarterly to include any additional 
prospective providers and any new commodities or types of services. 
Prospective providers must be allowed to submit applications for listing at 
any time. 

(3) The list must be compiled per commodity and per type of service. 


15. Petty cash purchases 


(1) The Accounting Officer must establish the conditions for the procurement of 
goods by means of cash purchases and petty cash purchases referred to in 
paragraph 12(l)(a) of this Policy, which must include conditions - 


(a) determining the terms on which a manager may delegate 
responsibility for cash purchases and petty cash purchases to an 
official reporting to the manager; 

(b) limiting the maximum number of cash purchases and petty cash 
purchases or the maximum amounts per month for each manager; 

(c) excluding any types of expenditure from cash purchases and petty 
cash purchases, where this is considered necessary; 

(d) requiring a monthly reconciliation report from each manager to the 
Chief Financial Officer, including - 

(i) the total amount of cash purchases and petty cash 
purchases for that month; and 

(ii) receipts and appropriate documents for each purchase; and 


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23 




(e) any other conditions determined by the Chief Financial Officer. 

(2) Cash purchases will be dealt with in terms of the Petty Cash Policy of Council. 

(3) Petty cash purchases will be dealt with in terms of the Supply Chain 
Management Policy of Council. 

16. Written quotations 


(1) The conditions for the procurement of goods or services through written or 

verbal quotations are as follows - 

(a) Quotations must be obtained from at least three different providers 
preferably from, but not limited to, providers whose names appear on 
the list of accredited prospective providers of the Drakenstein 
Municipality, provided that if quotations are obtained from providers 
who are not listed, such providers must meet the listing criteria set 
out in paragraph 13 of this Policy; 

(b) Where no suitable providers are available from the list of accredited 
prospective providers, quotations may be obtained from other 
possible providers; 

(c) To the extent feasible, providers must be requested to submit such 
quotations in writing; 

(d) If it is not possible to obtain at least three quotations, the reasons 
must be recorded and reported quarterly to the Accounting Officer or 
another official designated by the Accounting Officer; 

(e) The Accounting Officer must record the names of the potential 
providers requested to provide such quotations with their quoted 
prices; and 


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(f) If a quotation was submitted verbally, the order may be placed only 
against written confirmation by the selected provider. 


17. Formal written price quotations 


(1) The conditions for the procurement of goods or services through formal 
written price quotations are as follows:- 

(a) Quotations must be obtained in writing from at least three different 
providers whose names appear on the list of accredited prospective 
providers of the Drakenstein Municipality. Quotations may be 
obtained from providers who are not listed, provided that such 
providers meet the listing criteria set out in paragraph 13 of this 
Policy; 

(b) Where no suitable providers are available from the list of accredited 
prospective providers, quotations may be obtained from other 
possible providers not registered on the municipal supplier database; 

(c) If it is not possible to obtain at least three quotations, the reasons 
must be recorded and approved by the Chief Financial Officer or an 
official designated by the Chief Financial Officer; 

(d) The Accounting Officer must record the names of the potential 
providers and their written quotations; and 

(e) For the obtaining of quotations for services, Drakenstein Municipality 
will utilize their notice boards. 

(2) A designated official referred to in subparagraph (l)(c) must within three days 
of the end of each month report to the Chief Financial Officer on any 
approvals given during that month by that official in terms of that 
subparagraph. 


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18. Procedures for procuring goods or services through written or verbal quotations and 
formal written price quotations 


(1) The procedure for the procurement of goods or services through written or 
verbal quotations or formal written price quotations is as follows - 


(a) When using the list of accredited prospective providers the 
Accounting Officer must promote ongoing competition amongst 
providers by inviting providers to submit quotations on a rotation 
basis; 

(b) Where no suitable providers are available from the list of accredited 
prospective providers, quotations may be obtained from other 
possible providers not registered on the municipal supplier database; 

(c) All requirements in excess of R30,000 (VAT included) that are to be 
procured by means of formal written price quotations must, in 
addition to the requirements of paragraph 17, be advertised for at 
least seven days on the website and an official notice board of the 
Drakenstein Municipality; 

(d) Offers received must be evaluated on a comparative basis taking into 
account unconditional discounts; 

(e) The Accounting Officer or Chief Financial Officer must on a monthly 
basis be notified in writing of all written or verbal quotations and 
formal written price quotations accepted by an official acting in terms 
of a sub-delegation; 

(f) Offers below R30,000 (VAT included) must be awarded based on 
compliance to specification and conditions of contract, ability and 
capability to deliver the goods and services and lowest price; 

(g) Acceptable offers, which are subject to the preference points system 
(PPPFA and associated regulations), must be awarded to the bidder 
who scored the highest points; and 


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(h) Drakenstein Municipality will maintain a proper record keeping 
system. 


19. Competitive bids 


(1) Goods or services above a transaction value of R200,000 (VAT included) and 
long term contracts may only be procured through a competitive bidding 
process, subject to paragraph 11(2) of this Policy. 

(2) No requirement for goods or services above an estimated transaction value 
of R200,000 (VAT included), may deliberately be split into parts or items of 
lesser value merely for the sake of procuring the goods or services otherwise 
than through a competitive bidding process. 

20. Process for competitive bidding 


(1) The procedures for the following stages of a competitive bidding process are 
as follows:- 

(a) Compilation of bidding documentation as detailed in paragraph 21; 

(b) Public invitation of bids as detailed in paragraph 22; 

(c) Site meetings or briefing sessions as detailed in paragraph 22; 

(d) Handling of bids submitted in response to public invitation as detailed 
in paragraph 23; 

(e) Evaluation of bids as detailed in paragraph 28; 

(f) Award of contracts as detailed in paragraph 29; 

(g) Administration of contracts; 


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(h) After approval of a bid, the Accounting Officer and the bidder must 
enter into a written agreement; 

(i) Proper record keeping; and 

(j) Original / legal copies of written contracts agreements must be kept 
in a secure place for reference purposes. 


21. Bid documentation for competitive bids 


(1) The criteria to which bid documentation for a competitive bidding process 
must comply, must - 


(a) Take into account - 

(i) The general conditions of contract and any special conditions 
of contract, if specified; 

(ii) Any Treasury guidelines on bid documentation; and 

(iii) The requirements of the Construction Industry Development 
Board, in the case of a bid relating to construction, upgrading 
or refurbishment of buildings or infrastructure; 

(b) Include the preference points system to be used, goals as 
contemplated in the Preferential Procurement Regulations and 
evaluation and adjudication criteria, including any criteria required by 
other applicable legislation; 

(c) Compel bidders to declare any conflict of interest they may have in 
the transaction for which the bid is submitted; 


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(d) If the value of the transaction is expected to exceed RIO million (VAT 
included), require bidders to furnish - 

(i) If the bidder is required by law to prepare annual financial 
statements (AFS) for auditing, their audited AFS - 

(aa) For the past three years; or 

(bb) Since their establishment if established duringthe past 
three years; 

(ii) A certificate signed bythe biddercertifyingthatthe bidderhas 
no undisputed commitments for municipal services towards a 
municipality or other service provider in respect of which 
payment is overdue for more than 30 days; 

(iii) Particulars of any contracts awarded to the bidder by an organ 
of state during the past five years, including particulars of any 
material non-compliance or dispute concerning the execution 
of such contract; 

(iv) A statement indicating whether any portion of the goods or 
services are expected to be sourced from outside the Republic, 
and if so, what portion and whether any portion of payment 
from the municipality or municipal entity is expected to be 
transferred out of the Republic; and 

(e) Stipulate that disputes must be settled by means of mutual 
consultation, mediation, adjudication (with or without legal 
representation), or, when unsuccessful, in a South African court of 
law; 


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22 . 


Public invitation for competitive bids 


(1) The procedure for the invitation of competitive bids is as follows - 


(a) Any invitation to prospective providers to submit bids must be by 
means of a public advertisement in newspapers commonly circulating 
locally, the website of the Drakenstein Municipality or any other 
appropriate ways (which may include an advertisement in the 
Government Tender Bulletin and National Treasury's e-Tender 
Publication Portal); and 


(b) The information contained in a public advertisement, must at least 

include the following - 

(i) The title of the bid; 

(ii) The bid number; 

(iii) Functionality, if applicable; 

(iv) Local content, if applicable; 

(v) The place where the bid documentation is available for 
collection and the times between which bid documents may 
be collected; 

(vi) The closure date for the submission of bids, which may not be 
less than 30 days in the case of transactions over R10 million 
(VAT included), or which are of a long term nature, or 14 days 
in any other case, from the date on which the advertisement 
is placed in a newspaper, subject to subparagraph (2) of this 
policy; 


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(vii) A statement that bids may only be submitted on the bid 
documentation provided by the Drakenstein Municipality; 

(viii) Date, time and venue of any proposed site meetings or 
briefing sessions and whether such meetings are compulsory, 
if applicable; 

(ix) Payment of a non-refundable fee is required by bidders 
wanting to collect bid documents which deposit amount shall 
be determined by the Municipal Council from time to time; 
and 

(x) The bid validity period. 


(2) The Accounting Officer may determine a closure date for the submission of 
bids which is less than the 30 or 14 days requirement, but only if such shorter 
period can be justified on the grounds of urgency or emergency or any 
exceptional case where it is impractical or impossible to follow the official 
procurement process. 

(3) Bids submitted must be sealed and must clearly indicate the bid number on 
the outside of the envelope for which the bid is being submitted. 

(4) Where bids are requested by the Municipality in electronic format, such bids 
must be supplemented by sealed hard copies, in which case the hard copy 
will be bidding. 

(5) The Municipality may require bidders to submit section(s) of their bid in 
electronic format, but only after the bid closing date. If the electronic copy 
differs from the original hard copy, the original hard copy will be binding. 


23. Procedure for handling, opening and recording of competitive bids and formal 
written price quotations in excess of R30,000 

(1) The proceduresforthe handling, opening and recordingof bids are as follows- 


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(a) Bids 


(i) Must be opened only in public; 

(ii) must be opened at the same time and as soon as possible after 
the period for the submission of bids has expired; and 

(iii) Received after the closing time should not be considered and 
returned unopened immediately; and 

(b) Any bidder or member of the public has the right to request that the 
names of the bidders who submitted bids in time must be read out 
and, if practical, also each bidder's total bidding price; 


(c) No information, except the provisions in subparagraph (b), relating to 
the bid should be disclosed to bidders or other persons until the 
successful bidder is notified of the award; 


(d) The Accounting Officer must - 

(i) Record in a register all bids received in time; 


(ii) Make the register available for public inspection; and 


(iii) Publish the entries in the register and the bid results on the 
website. 


(e) Bid validity periods 


(i) A minimum bid validity period will apply to all bids and will be 
calculated from the bid closure date. Bids shall remain in force 
and binding for the minimum bid validity period as indicated 
in the invitation to bid and the bid documents, subject to any 


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32 





other applicable legislation and instructions from the National 
Treasury for specific types of procurement. 


(ii) Unless otherwise indicated in writing by the bidder, the 
validity of bids submitted will automatically extend beyond 
the minimum bid validity period as set out in sub-paragraph 
(h)(i) above and will remain valid for acceptance until the bid 
award process, including the consideration of any appeals, 
objections or complaints, has been concluded. 

(iii) Any bidder may at any time withdraw such bid in writing in 
which case such bid lapses and will not be further considered. 

24. Negotiations with preferred bidders 


(1) The Accounting Officer may negotiate the final terms of a contract with 
bidders identified through a competitive bidding process as preferred 
bidders, provided that such negotiation - 

(a) Does not allow any preferred bidder a second or unfair opportunity; 

(b) Is not to the detriment of any other bidder; and 

(c) Does not lead to a higher price than the bid as submitted. 

(2) Minutes of such negotiations must be kept for record purposes. 


25. Two-stage bidding process 


(1) A two-stage bidding process is allowed for - 


(a) Large complex projects; 


(b) Projects where it may be undesirable to prepare complete detailed 


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technical specifications; or 


(c) Long term projects with a duration period exceeding three years. 


(2) In the first stage technical proposals on conceptual design or performance 
specifications should be invited, subject to technical as well as commercial 
clarifications and adjustments. 

(3) In the second stage final technical proposals and priced bids should be 
invited. 


26. Committee system for competitive bids 


(1) A committee system for competitive bids is hereby established, consisting of 
the following committees for each procurement or cluster of procurements 
as the Accounting Officer may determine as issued within the directive and 
stating the terms of reference of each bid committee - 

(a) A Bid Specifications Committee; 

(b) A Bid Evaluation Committee; and 

(c) A Bid Adjudication Committee. 

(2) The Accounting Officer appoints the members of each committee, taking into 
account section 117 of the Act; and 

(3) A neutral or independent observer, appointed by the Accounting Officer, 
must attend or oversee a committee when this is appropriate for ensuring 
fairness and promoting transparency. 

(4) The committee system must be consistent with - 


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(a) Paragraph 27, 28 and 29 of this Policy; 


(b) Any other applicable legislation; and 


(c) The Accounting Officer may apply the committee system to formal 
written price quotations. 


27. Bid Specifications Committee 


(1) A Bid Specifications Committee must compile the specifications for each 
procurement of goods or services by the Drakenstein Municipality. 

(2) Specifications - 


(a) Must be drafted in an unbiased manner to allow all potential suppliers 
to offer their goods or services; 

(b) Must take account of any accepted standards such as those issued by 
Standards South Africa, the International Standards Organisation, or 
an authority accredited or recognised by the South African National 
Accreditation System with which the equipment or material or 
workmanship should comply; 

(c) Must, where possible, be described in terms of performance required 
rather than in terms of descriptive characteristics for design; 

(d) May not create trade barriers in contract requirements in the forms 
of specifications, plans, drawings, designs, testing and test methods, 
packaging, marking or labelling of conformity certification; 

(e) May not make reference to any particular trade mark, name, patent, 
design, type, specific origin or producer unless there is no other 


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sufficiently precise or intelligible way of describing the characteristics 
of the work, in which case such reference must be accompanied by 
the word "equivalent"; 


(f) Must indicate the preference points system set out in the Preferential 
Procurement Regulations 2017; 

(g) Must be approved by the Accounting Officer prior to publication of 
the invitation for bids in terms of paragraph 22 of this Policy; and 

(h) The Accounting Officer may sub-delegate the requirements in 
subparagraph 2(g) above to the Chairperson of the Bid Specifications 
Committee. 

(3) A Bid Specifications Committee must be composed of one or more officials of 
the Drakenstein Municipality preferably the manager responsible for the 
function involved, and may, when appropriate, include external and / or 
internal specialist advisors. 

(4) No person, advisor or corporate entity involved with the Bid Specifications 
Committee, or director of such a corporate entity, may bid for any resulting 
contracts. 


28. Bid Evaluation Committees 


(1) A Bid Evaluation Committee must - 


(a) Evaluate bids in accordance with - 


(i) The specifications for a specific procurement; and 


(ii) The points system set out in terms of paragraph 27(2)(f); 


(b) Evaluate each bidder's ability to execute the contract; 


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36 




(c) Check in respect of the recommended bidder whether municipal rates 
and taxes and municipal service charges are not in arrears; and 

(d) Submit to the adjudication committee a report and recommendations 
regarding the award of the bid or any other related matter. 


A Bid Evaluation Committee must as far as possible be composed of - 


(a) Officials from departments requiring the goods or services; and 


(b) At least one supply chain management practitioner of the Drakenstein 
Municipality. 


The relevant user department's official shall carry out a preliminary 
evaluation of all valid bids received and shall submit a bid evaluation report 
to the Bid Evaluation Committee for consideration. 


Any evaluation of a bid shall consider the bids received and shall note for 
inclusion in the evaluation report, a bidder - 


(a) Whose bid does not comply with the provisions of paragraph 38 of 
this Policy; 

(b) Whose bid does not comply with the provisions of paragraph 13 of 
this 

Policy; 

(c) Whose bid is not in compliance with the specification; 

(d) Whose bid is not in compliance with the terms and conditions of the 
bid documentation; 

(e) Who is not registered and verified on the municipality's supplier 
database by the closing time for bids. In this regard bid 


Supply Chain Management Policy 




documentation shall state that the responsibility for registration and 
verification rests solely with the bidder; 

(f) Who, in the case of construction works acquisitions, does not comply 
with the requirements of the Construction Industry Development 
Board Act regarding registration of contractors. Verification of 
compliance with this requirement shall be by means of Drakenstein 
Municipality's Supplier Database; 

(g) Who has failed to submit a valid tax clearance from the South African 
Revenue Services (SARS) certifying that the taxes of the bidder are in 
order or that suitable arrangements have been made with SARS; and 

(h) Who fails to comply with any applicable Bargaining Council 
agreement. 

(5) Bids shall be evaluated according to the following as applicable - 

(i) Bid price (corrected if applicable and brought to a comparative level 
where necessary); 

(ii) The unit rates and prices; 

(iii) The bidder's ability to fulfil its obligations in terms of the bid 
documents; 

(iv) Any qualifications to the bid; 

(v) The bid ranking obtained in respect of Preferential Procurement as 
required; 

(vi) The financial standing of the bidder, including its ability to furnish the 
required institutional guarantee, where applicable; and 

(vii) Any other criteria specified in the bid documents. 


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38 




(6) The Bid Evaluation Committee shall check in respect of the recommended 
bidder whether municipal rates and taxes and municipal service charges are 
not in arrears. 

(7) The evaluation of bids on an equitable basis may be considered during the 
evaluation process. 

(8) Additional information or clarification of bids may be called for if required. 

(9) Alternative bids may be considered, provided that a bid free of qualifications 
and strictly in accordance with the bid documents is also submitted. 
Drakenstein Municipality shall not be bound to consider alternative bids. The 
alternative offer is to be submitted with the main offer together with a 
schedule that compares the specifications of the bid documents with the 
alternative offer. 

(10) If a bidder requests in writing, after the closing of bids, that his/her bid be 
withdrawn, then such a request may be considered and reported in the bid 
evaluation report. 

(11) If, after bids have been brought to a comparative level, two or more scores 
equal total adjudication points, regulation 10 of the Preferential 
Procurement Regulations of 2017 will apply. 

(12) If two or more bids are equal in all respects after applying regulation 10(2) 
Preferential Procurement Regulations of 2017, the Bid Evaluation 
Committee shall draw lots to decide on the recommendation for award. 

(13) All disclosures of conflict of interest shall be considered by the Bid Evaluation 
Committee and if the conflict of interest is of a material nature, this shall be 
reported to the Bid Adjudication Committee. 

(14) The relevant Executive Director or the Manager: Supply Chain Management 
may, before the bid is considered by the Bid Evaluation Committee, provide 
a reasonable opportunity to a bidder who made an innocent error and / or 
omission in their bid document, to correct the innocent error and / or 


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39 




omission, provided that such opportunity will not unduly prejudice any of 
the other bidders. 


(15) In an event as described in sub-paragraph 14, bidders shall be afforded a 
minimum of two (2) working days up to a maximum of five (5) working days 
(on discretion of the relevant Executive Director or the Manager: Supply 
Chain Management) from time of notification to correct such innocent errors 
and / or omissions. If no response is received from such bidders at the 
deadline the bid may be deemed to be non-responsive. 


29. Bid Adjudication Committees 


(1) A Bid Adjudication Committee must - 

(a) Consider the report and recommendations of the Bid Evaluation 

Committee; and 

(b) Either- 

(i) Depending on its delegations, make a final award or a 
recommendation to the Accounting Officer to make the final 
award; or 

(ii) Make another recommendation to the Accounting Officer 
how to proceed with the relevant procurement. 

(2) A Bid Adjudication Committee must consist of at least four senior managers 
of the Drakenstein Municipality, which must include - 


(a) The Chief Financial Officer or, if the Chief Financial Officer is not 
available, another manager in the budget and treasury office 
reporting directly to the Chief Financial Officer and designated by the 
Chief Financial Officer; 


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(b) At least one senior supply chain management practitioner who is an 
official of the Drakenstein Municipality; and 

(c) A technical expert in the relevant field who is an official, if such an 
expert exists. 

(3) The Accounting Officer must appoint the chairperson of the committee. If the 
chairperson is absent from a meeting, the members of the committee who 
are present must elect one of them to preside at the meeting. 

(4) Neither a member of a Bid Evaluation Committee, nor an advisor or person 
assisting the evaluation committee, may be a member of a Bid Adjudication 
Committee. 

(5) (a) If the Bid Adjudication Committee decides to award a bid other than 

the one recommended by the Bid Evaluation Committee, the Bid 
Adjudication Committee must prior to awarding the bid- 

(i) Check in respect of the preferred bidder whether that bidder's 
municipal rates and taxes and municipal service charges are 
not in arrears; and 

(ii) Notify the Accounting Officer. 

(b) The Accounting Officer may - 

(i) After due consideration of the reasons for the deviation, ratify 
or reject the decision of the Bid Adjudication Committee 
referred to in paragraph (a); and 

(ii) If the decision of the Bid Adjudication Committee is rejected, 
refer the decision of the Adjudication Committee back to that 
committee for reconsideration. 

(6) The Accounting Officer may at any stage of a bidding process, refer any 
recommendation made by the Evaluation Committee or the Adjudication 


Supply Chain Management Policy 


41 




Committee back to that committee for reconsideration of the 
recommendation. 

(7) The Accounting Officer must comply with section 114 of the Act within 10 
working days 


30. Procurement of banking services 


(1) A contract for banking services - 

(a) Must be procured through competitive bids; 

(b) Must be consistent with section 7 or 85 of the Act; and 

(c) May not be for a period of more than five years at a time. 

(2) The process for procuring a contract for banking services must commence at 
least nine months before the end of an existing contract. 

(3) The closure date for the submission of bids may not be less than 60 days from 
the date on which the advertisement is placed in a newspaper in terms of 
paragraph 22(1). Bids must be restricted to banks registered in terms of the 
Banks Act, 1990 (Act No. 94 of 1990). 


31. Procurement of IT related goods or services 


(1) The Accounting Officer may request the State Information Technology 
Agency (SITA) to assist with the acquisition of IT related goods or services 
through a competitive bidding process. 

(2) Both parties must enter into a written agreement to regulate the services 
rendered by and the payments to be made to SITA. 


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(3) The Accounting Officer must notify SITA together with a motivation of the IT 
needs if- 

(a) The transaction value of IT related goods or services required in any 
financial year will exceed R 50 million (VAT included); or 

(b) The transaction value of a contract to be procured whether for one or 
more years exceeds R 50 million (VAT included). 

(4) If SITA's comments on the submission and the Drakenstein Municipality 
disagree with such comments, the comments and the reasons for rejecting 
or not following such comments must be submitted to the council, the 
National Treasury, the relevant provincial treasury and the Auditor General. 


32. Procurement of goods and services under contracts secured by other organs of state 

(1) The Accounting Officer may procure goods or services under a contract 

secured by another organ of state, but only if - 

(a) The contract has been secured by that other organ of state by means 
of a competitive bidding process applicable to that organ of state; 

(b) There is no reason to believe that such contract was not validly 
procured; 

(c) There are demonstrable discounts or benefits to do so; and 

(d) That other organ of state and the provider has consented to such 
procurement in writing. 

(2) Subparagraphs (l)(c) and (d) do not apply if- 


(a) A municipal entity procures goods or services through a contract 
secured by its parent municipality; or 


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(b) A municipality procures goods or services through a contract secured 
by a municipal entity of which it is the parent municipality. 


(3) If Drakenstein Municipality should enter into a contract secured by other 
organs of state, it shall enter into a contract with the successful bidder(s) on 
the same terms and conditions as accepted by the relevant organ of state. 

(4) Contracts entered into by Drakenstein Municipality under subparagraph (3) 
shall not be deemed to be a deviation from the official procurement 
processes. 

(5) The Accounting Officer shall report to Council on a monthly basis all contracts 
entered into in terms of subparagraph (3) above. 


33. Procurement of goods necessitating special safety arrangements 

(1) The acquisition and storage of goods in bulk (other than water), which 
necessitate special safety arrangements, including gasses and fuel, should be 
avoided wherever possible. 

(2) Where the storage of goods in bulk is justified, such justification must be 
based on sound reasons, including the total cost of ownership, cost 
advantages and environmental impact and must be approved by the 
Accounting Officer. 


34. Proudly SA Campaign 


(1) Drakenstein Municipality supports the Proudly SA Campaign to the extent 
that, all things being equal, preference is given to procuring local goods and 
services from - 


(a) Firstly: Suppliers and businesses within the municipality or district; 

(b) Secondly: Suppliers and businesses within the relevant province; and 


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(c) Thirdly: Suppliers and businesses within the Republic. 


35. Appointment of consultants 


(1) The Accounting Officer may procure consulting services provided that any 
Treasury guidelines in respect of consulting services or Construction Industry 
Development Board guidelines in respect of services related to the built 
environment and construction works are taken into account when such 
procurements are made. 

(2) Consultancy services must be procured through competitive bids if - 

(a) The value of the contract exceeds R200,000 (VAT included); or 

(b) The duration period of the contract exceeds one year. 

(3) In addition to any requirements prescribed bythis policyforcompetitive bids, 
bidders must furnish particulars of - 

(a) All consultancy services provided to an organ of state in the last five 
years; and 

(b) Any similar consultancy services provided to an organ of state in the 
last five years. 

(4) The Accounting Officer must ensure that copyright in any document 
produced, and the patent rights or ownership in any plant, machinery, thing, 
system or process designed or devised, by a consultant in the course of the 
consultancy service is vested in the Drakenstein Municipality . 

(5) Where the estimated value of fees is less than R 200,000 and the duration of 
the appointment is less than one year, any National Treasury and, where 
applicable, Construction Industry Development Board guidelines in respect of 
consulting services are taken into account. 


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36. 


Deviation from and ratification of minor breaches of procurement processes 


(1) The Accounting Officer may- 

(a) Dispense with the official procurement processes established by this 
Policy and to procure any required goods or services through any 
convenient process, which may include direct negotiations, but only - 

(i) In an emergency (as per definition); 

(ii) If such goods or services are produced or available from a 
single source or sole provider only (as per definition); 

(iii) For the acquisition of special works of art or historical objects 
where specifications are difficult to compile; 

(iv) Acquisition of animals for zoos and/or nature and game 
reserves; or 

(v) In any other exceptional case where it is impractical or 
impossible to follow the official procurement processes; and 

(b) Ratify any minor breaches of the procurement processes by an official 
or committee acting in terms of delegated powers or duties, which are 
purely of a technical nature. 

(2) The Accounting Officer must record the reasons for any deviations in terms 
of subparagraphs (l)(a) and (b) of this policy and report them to the next 
meeting of the council and include as a note to the annual financial 
statements. 

(3) Subparagraph (2) does not apply to the procurement of goods and services 
contemplated in paragraph 11(2) of this policy. 


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37. 


Unsolicited bids 


(1) In accordance with section 113 of the Act there is no obligation to consider 
unsolicited bids received outside a normal bidding process. 

(2) The Accounting Officer may decide in terms of section 113(2) of the Act to 
consider an unsolicited bid, only if- 

(a) The product or service offered in terms of the bid is a demonstrably 
or proven unique innovative concept; 

(b) The product or service will be exceptionally beneficial to, or have 
exceptional cost advantages; 

(c) The person who made the bid is the sole provider of the product or 
service; and 

(d) The reasons for not going through the normal bidding processes are 
found to be sound by the Accounting Officer. 

(3) If the Accounting Officer decides to consider an unsolicited bid that complies 
with subparagraph (2) of this policy, the decision must be made public in 
accordance with section 21A of the Municipal Systems Act, together with - 

(a) Reasons as to why the bid should not be open to other competitors; 

(b) An explanation of the potential benefits if the unsolicited bid were 
accepted; and 

(c) An invitation to the public or other potential suppliers to submit their 
comments within 30 days of the notice. 

(4) The Accounting Officer must submit all written comments received pursuant 
to subparagraph (3), including any responses from the unsolicited bidder, to 
the National Treasury and the relevant provincial treasury for comment. 


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(5) The adjudication committee must consider the unsolicited bid and may 
award the bid or make a recommendation to the Accounting Officer, 
depending on its delegations. 

(6) A meeting of the adjudication committee to consider an unsolicited bid must 
be open to the public. 

(7) When considering the matter, the adjudication committee must take into 
account - 

(a) Any comments submitted by the public; and 

(b) Any written comments and recommendations of the National 
Treasury or the relevant provincial treasury. 

(8) If any recommendations of the National Treasury or provincial treasury are 
rejected or not followed, the Accounting Officer must submit to the Auditor 
General, the relevant provincial treasury and the National Treasury the 
reasons for rejecting or not following those recommendations. 

(9) Such submission must be made within seven days after the decision on the 
award of the unsolicited bid is taken, but no contract committing the 
Drakenstein Municipality to the bid may be entered into or signed within 30 
days of the submission. 


38. Combating of abuse of supply chain management system 


(1) The Accounting Officer must - 


(a) Take all reasonable steps to prevent abuse of the supply chain 
management system; 

(b) Investigate any allegations against an official or other role player of 
fraud, corruption, favouritism, unfair or irregular practices or failure 
to comply with this Policy, and when justified - 


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(i) Take appropriate steps against such official or other role 
player; or 

(ii) Report any alleged criminal conduct to the South African 
Police Service; 


Check the National Treasury's database prior to awarding any contract 
to ensure that no recommended bidder, or any of its directors, is listed 
as a person prohibited from doing business with the public sector; 


Reject any bid from a bidder - 


(i) If any municipal rates and taxes or municipal service charges 
owed by that bidder or any of its directors to the Drakenstein 
Municipality or to any other municipality or municipal entity, 
are in arrears for more than three months; or 

(ii) Who during the last five years has failed to perform 
satisfactorily on a previous contract with the Drakenstein 
Municipality or any other organ of state after written notice 
was given to that bidder that performance was unsatisfactory; 


Reject a recommendation for the award of a contract if the 
recommended bidder or any of its directors, or trust or its trustees has 
committed a corrupt or fraudulent act in competing for the particular 
contract; 


Cancel a contract awarded to a person if- 


(i) The person committed any corrupt or fraudulent act during 
the bidding process or the execution of the contract; or 

(ii) An official or other role player committed any corrupt or 
fraudulent act during the bidding process or the execution of 
the contract that benefited that person; and 


Supply Chain Management Policy 




(g) Reject the bid of any bidder if that bidder or any of its directors - 


(i) Has abused the supply chain management system of the 
Drakenstein Municipality or has committed any improper 
conduct in relation to such system; 

(ii) Has been convicted for fraud or corruption during the past five 
years; 

(iii) Has wilfully neglected, reneged on or failed to comply with any 
government, municipal or other public sector contract during 
the past five years; or 

(iv) Has been listed in the Register for Tender Defaulters in terms 
of section 29 of the Prevention and Combating of Corrupt 
Activities Act (No 12 of 2004). 

(2) The Accounting Officer must inform the National Treasury and relevant 
provincial treasury in writing of any actions taken in terms of subparagraphs 
(l)(b)(ii), (e) or (f) of this Policy. 


(3) The performance of service providers will be measured against the 
stipulations within the municipality's Blacklisting Policy. 

Part 3: Logistics, Disposal, Risk and Performance Management 


39. Logistics management 


(1) The Accounting Officer must establish and implement an effective system of 
logistics management, which must include - 


(a) The monitoring of spending patterns on types or classes of goods and 
services incorporating, where practical, the coding of items to ensure 
that each item has a unique number; 


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50 




(b) The setting of inventory levels that includes minimum and maximum 
levels and lead times wherever goods are placed in stock; 

(c) The placing of manual or electronic orders for all acquisitions other 
than those from petty cash; 

(d) Before payment is approved, certification by the responsible officer 
that the goods and services are received or rendered on time and is in 
accordance with the order, the general conditions of contract and 
specifications where applicable and that the price charged is as 
quoted in terms of a contract; 

(e) Appropriate standards of internal control and warehouse 
management to ensure that goods placed in stores are secure and 
only used for the purpose for which they were purchased; 

(f) Regular checking to ensure that all assets including official vehicles are 
properly managed, appropriately maintained and only used for official 
purposes; and 

(g) Monitoring and review of the supply vendor performance to ensure 
compliance with specifications and contract conditions for particular 
goods or services. 


40. Disposal management 


(1) A supply chain management policy must provide for an effective system of 
disposal management for the disposal or letting of assets, including 
unserviceable, redundant or obsolete assets, subject to sections 14 and 90 of 
the Act 

(2) A supply chain management policy must specify the ways in which assets may 
be disposed of, including - 


(a) Transferring the asset to another organ of state in terms of a provision 
of the Act enabling the transfer of assets; 


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51 




(b) Transferring the asset to another organ of state at market related 
value or, when appropriate, free of charge; 

(c) Selling the asset; and 

(d) Destroying the asset. 


(3) The Accounting Officer must ensure that - 


(a) Immovable property is sold only at market related prices except when 
the public interest or the plight of the poor demands otherwise; 

(b) Movable assets are sold either by way of written price quotations, a 
competitive bidding process, auction or at market related prices, 
whichever is the most advantageous, except when the public interest 
or the plight of the poor demands otherwise; 

(c) Firearms are not sold or donated to any person or institution within 
or outside the Republic unless approved by the National Conventional 
Arms Control Committee; 

(d) Immovable property is let at market related rates except when the 
public interest or the plight of the poor demands otherwise; 

(e) All fees, charges, rates, tariffs, scales of fees or other charges relating 
to the letting of immovable property are annually reviewed; 

(f) Where assets are traded in for other assets, the highest possible trade 
in price is negotiated; and 

(g) In the case of the free disposal of computer equipment, the provincial 
department of education is first approached to indicate within 30 days 
whether any of the local schools are interested in the equipment. 


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52 




(4) All matters relating to the alienation of movable and immovable assets shall 
be dealt with in terms of Council's Asset Transfer Policy and the Asset 
Transfer Regulations, 2008. 

(5) Notwithstanding the provisions of paragraph 3 hereof, the following 
statutory powers of Drakenstein Council in respect of the alienation of 
immovable property, are reserved to be exercised by Council - 

(a) To decide on reasonable grounds that an asset is not needed to 
provide the minimum level of basic municipal services; and 

(b) To considered the fair market value of the asset and the economic and 
community value to be received in exchange for the asset, and 

(6) Notwithstanding sub-paragraph (3)(b) & (g) above, the Accounting Officer 
must determine the most advantageous way for the disposal or letting of 
movable capital assets, i.e. written price quotations, competitive bidding, or 
auction, except when public interest or the plight of the poor demands 
otherwise. 

(7) The Accounting Officer is hereby authorized to dispose of movable capital 
assets below a value of R500,000 (excluding the approval for selling of assets 
via public auction process) and to make the determinations in terms of 
Section 14(2)(a) and (b) of the MFMA, provided that, in respect of capital 
assets above a value of R200,000 not being auctioned, the Accounting Officer 
shall first consider a recommendation from the Supply Chain Management 
Bid Adjudication Committee. 


41. Risk management 


(1) The criteria for an effective risk management strategy within supply chain 
management system, should include the identification, consideration and 
avoidance of potential risks. 

(2) Risk management should include - 


(a) The identification of risks on a case-by-case basis; 


Supply Chain Management Policy 


53 




(b) The allocation of risks to the party best suited to manage such risks; 

(c) Acceptance of the cost of the risk where the cost of transferring the 
risk is greater than that of retaining it; 

(d) The management of risks in a pro-active manner and the provision of 
adequate coverfor residual risks; and 

(e) The assignment of relative risks to the contracting parties through 
clear and unambiguous contract documentation. 


42. Performance management 


(1) The Accounting Officer must establish and implement an internal monitoring 
system in order to determine, on the basis of a retrospective analysis, 
whether the authorised supply chain management processes were followed 
and whether the objectives of this Policy were achieved. The retrospective 
analysis will link to the regulatory reports and submissions on the 
implementation of the supply chain management policy to the delegated 
authorities as prescribed in terms of supply chain management regulations 
and the delegation system of council, as amended from time to time. 


Part 4: Other matters 


43. Prohibition on awards to persons whose tax matters are not in order 

(1) No award above R30,000 (including VAT) may be made in terms of this Policy 
to a person whose tax matters have not been declared by the South African 
Revenue Service to be in order. 

(2) Before making an award to a person the Accounting Officer must first check 
with SARS whether that person's tax matters are in order. 


Supply Chain Management Policy 


54 




(3) If SARS does not respond within 7 days such person's tax matters may for 
purposes of subparagraph (1) be presumed to be in order. 

(4) Drakenstein Municipality will process transactions per supplier on the proviso 
that the accumulative amounts per supplier does not exceed R30,000 
(including VAT) per financial year, without the required tax clearance as per 
paragraph 43(1) above. 


44. Prohibition on awards to persons in the service of the state 


(1) Irrespective of the procurement process followed, no award may be made to 
a person in terms of this Policy - 


(a) Who is in the service of the state; 

(b) If that person is not a natural person, of which any director, manager, 
principal shareholder or stakeholder is a person in the service of the 
state; or 

(c) A person who is an advisor or consultant contracted with the 
Drakenstein Municipality. 


45. Awards to close family members of persons in the service of the state 

(1) The Accounting Officer must ensure that the notes to the annual financial 
statements disclose particulars of any award of more than R2,000 to a person 
who is a spouse, child or parent of a person in the service of the state, or has 
been in the service of the state in the previous twelve months, including - 


(a) The name of that person; 


(b) The capacity in which that person is in the service of the state; and 


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(c) The amount of the award. 


46. Ethical standards 


(1) A code of ethical standards as set out in [subparagraph (2) / the "National 
Treasury's code of conduct for supply chain management practitioners and 
other role players involved in supply chain management, which also include 
all other municipal officials not involved in supply chain management system" 
is hereby established for municipal officials and other role players in the 
supply chain management system of the Drakenstein Municipality in orderto 
promote- 

(a) Mutual trust and respect; and 

(b) An environment where business can be conducted with integrity and 
in a fair and reasonable manner. 


(2) A municipal official or other role player involved in the implementation of this 
Policy- 


(a) Must treat all providers and potential providers equitably; 

(b) May not use his or her position for private gain or to improperly 
benefit another person; 

(c) May not accept any reward, gift, favour, hospitality or other benefit 
directly or indirectly, including to any close family member, partner or 
associate of that person, of a value more than R 350; 

(d) Notwithstanding subparagraph (2)(c), must declare to the Accounting 
Officer details of any reward, gift, favour, hospitality or other benefit 
promised, offered or granted to that person or to any close family 
member, partner or associate of that person; 


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(e) Must declare to the Accounting Officer details of any private or 
business interest which that person, or any close family member, 
partner or associate, may have in any proposed procurement or 
disposal process of, or in any award of a contract by, the Drakenstein 
Municipality; 

(f) Must immediately withdraw from participating in any manner 
whatsoever in a procurement or disposal process or in the award of a 
contract in which that person, or any close family member, partner or 
associate, has any private or business interest; 

(g) Must be scrupulous in his or her use of property belonging to 
Drakenstein Municipality; 

(h) Must assist the Accounting Officer in combating fraud, corruption, 
favouritism and unfair and irregular practices in the supply chain 
management system; and 

(i) Must report to the Accounting Officer any alleged irregular conduct in 
the supply chain management system which that person may become 
aware of, including - 

(i) Any alleged fraud, corruption, favouritism or unfair conduct; 

(ii) Any alleged contravention of paragraph 47(1) of this Policy; or 

(iii) Any alleged breach of this code of ethical standards. 

(3) Declarations in terms of subparagraphs (2)(d) and (e) - 


(a) Must be recorded in a register, which the Accounting Officer must 
keep for this purpose; and 


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(b) By the Accounting Officer must be made to the Executive Mayor of 
the municipality who must ensure that such declarations are recorded 
in the register. 

(4) The National Treasury's code of conduct and Schedule 2 of the Systems Act 
must be adhered to by supply chain management practitioners and other 
role players involved in supply chain management. 

(5) A breach of the code of ethics must be dealt with as follows - 

(a) In the case of an employee, in terms of the disciplinary procedures of 
the Drakenstein Municipality envisaged in section 67(l)(h) of the 
Municipal Systems Act; 

(b) In the case a role player who is not an employee, through other 
appropriate means in recognition of the severity of the breach; 

(c) In all cases, financial misconduct must be dealt with in terms of 
chapter 15 of the Act; and 

(d) All cases of non-compliance to this Policy should be reported to the 
Accounting Officer. 


47. Inducements, rewards, gifts and favours to municipalities, officials and other role 
players 

(1) No person who is a provider or prospective provider of goods or services, or 
a recipient or prospective recipient of goods disposed or to be disposed of 
may either directly or through a representative or intermediary promise, 
offer or grant - 

(a) Any inducement or reward to the Drakenstein Municipality for or in 
connection with the award of a contract; or 

(b) Any reward, gift, favour or hospitality to - 


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(i) 


Any official; or 


(ii) Any other role player involved in the implementation of this 
Policy. 


(2) The Accounting Officer must promptly report any alleged contravention of 
subparagraph (1) to the National Treasury for considering whether the 
offending person, and any representative or intermediary through which 
such person is alleged to have acted, should be listed in the National 
Treasury's database of persons prohibited from doing business with the 
public sector. 

(3) Subparagraph (1) does not apply to gifts less than R 350 in value. 

(4) Council's Gift Policy will apply which is consistent with subparagraphs (1) to 
(3). 


48. Sponsorships 

(1) The Accounting Officer must promptly disclose to the National Treasury and 
the relevant provincial treasury any sponsorship promised, offered or 
granted, whether directly or through a representative or intermediary, by any 
person who is - 

(a) A provider or prospective provider of goods or services; or 

(b) A recipient or prospective recipient of goods disposed or to be 
disposed. 

(2) Council's Gift Policy will apply which is consistent with subparagraph (1). 


49. Objections and complaints 


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59 




(1) Persons aggrieved by decisions or actions taken in the implementation of this 
supply chain management system, may lodge within 14 days of the decision 
or action, a written objection or complaint against the decision or action. 


50. Resolution of disputes, objections, complaints and queries 


(1) The Accounting Officer may, if deem so, appoint an independent and 
impartial person, not directly involved in the supply chain management 
processes - 

(a) To assist in the resolution of disputes between the Drakenstein 
Municipality and other persons regarding - 

(i) Any decisions or actions taken in the implementation of the 
supply chain management system; or 

(ii) Any matter arising from a contract awarded in the course of 
the supply chain management system; or 

(b) To deal with objections, complaints or queries regarding any such 
decisions or actions or any matters arising from such contract. 

(2) The Accounting Officer, or another official designated by the Accounting 
Officer, is responsible for assisting the appointed person to perform his or her 
functions effectively. 

(3) The person appointed should, if appointed - 

(a) Strive to resolve promptly all disputes, objections, complaints or 
queries received; and 

(b) Submit monthly reports to the Accounting Officer on all disputes, 
objections, complaints or queries received, attended to or resolved. 

(4) A dispute, objection, complaint or query may be referred to the relevant 
provincial treasury if - 


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(a) The dispute, objection, complaint or query is not resolved within 60 
days; or 

(b) No response is forthcoming within 60 days. 


(5) If the provincial treasury does not or cannot resolve the matter, the dispute, 
objection, complaint or query may be referred to the National Treasury for 
resolution. 

(6) This paragraph must not be read as affecting a person's rights to approach a 
court at any time. 

51. Contracts providing for compensation based on turnover 


(1) If a service provider acts on behalf of a Drakenstein Municipality to provide 
any service or act as a collector of fees, service charges or taxes and the 
compensation payable to the service provider is fixed as an agreed 
percentage of turnover for the service or the amount collected, the contract 
between the service provider and the Drakenstein Municipality must 
stipulate - 


(a) A cap on the compensation payable to the service provider; and 


(b) That such compensation must be performance based. 


52. Contract Management 


(1) Application 


The contract management provisions below are applicable only to contracts 
for the provision of goods or services 


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Competency 


All contracts must be administered by an official(s) having the necessary 
competencies to ensure effective management of the contract. 


Maintenance and Contract Administration 


(a) Contracts related to the procurement of goods and services will be 
captured on the financial system. 

(b) Value (where the maximum value of the contract is restricted) and 
volume (where the maximum units procured are restricted) based 
contracts will be used. 

(c) The use of fixed price, fixed term contracts will be promoted and 
expenditure will be driven towards contracts versus once-off 
purchases. 

(d) Consolidated (municipality wide) procurement volumes have to drive 
down the negotiated contract prices. 

(e) Contract price adjustments shall be processed only in accordance with 
contract terms and conditions. Price adjustments shall be made on 
the procurement contract and any current purchase orders shall be 
changed to reflect the new price. 


Contract Administration 


(a) Contract administration is the last stage of the tendering and contract 
cycle, and includes all administrative duties associated with a contract 
after it is executed, including contract review. 

(b) The effectiveness of contract administration will depend on how 
thoroughly the earlier steps were completed. Changes can be made 
far more readily early in the tendering cycle than after contract 
management has commenced. 


Supply Chain Management Policy 







(c) Some of the key early stages, which influence the effectiveness of 
contract administration, include - 

(i) Defining the output, that is, writing specifications which 
identify what the aims are; and 

(ii) Outputs of a contract will be assessed as follows - 


(aa) Assessing risk; 

(bb) Researching the market place (including conducting 
pretender briefings); 

(cc) Formulating appropriate terms and conditions of 
contract; 

(dd) Identifying appropriate performance measures and 
benchmarks so that all parties know in advance what 
is expected, and how it will be tested; 

(ee) Actively creating competition, so the best possible 
suppliers bid for contracts; and 

(ff) Evaluating bids competently, to select the best 
contractor, with a strong customer focus and good 
prospects of building a sound relationship. 


(5) Levels of Contract Administration 


(a) There are three levels of contract administration: 


(i) The first operational level is for standard contracts for goods 
and services. Day to day contract administration should 
become no more than a monitoring, record keeping and 


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payment authorization role. A standard contract, which 
requires excessive administration, is almost certainly the 
product of a failure in contract preparation stages. An example 
of an operational contract would be a stationery contract. 


(ii) The second or intermediate level is for more complex 
contracts for services. An example would be a contract to 
outsource cleaning services. This type of contract will require 
a more active role for the contract manager in developing the 
relationship between the Municipality and the contractor. 

(iii) The third level is for strategic contracts involving complex 
partnerships and outsourcing arrangements. These contracts 
need more active management of the business relationships 
between the supplier and the users, for example to manage 
outputs and not the process. Sufficient resources need to be 
dedicated by all parties to successfully manage these 
contractor relationships and, where feasible, to achieve 
partnership. A partnership is the result of mutual commitment 
to a continuing co-operative relationship, rather than parties 
working on a competitive and adversarial basis. 


Appointing a Contract Manager 


A contract manager should be appointed by the senior official in 
charge of the project prior to the execution of the contract. 


Where it is practical to do so, the contract manager should be involved 
at the earliest stage of the acquisition, which is the time of writing the 
specification. Contract administration arrangements should be 
identified and planned including who, how, delegations, reporting 
requirements and relationships and specifictask responsibilities. 


Departments shall be responsible for ensuring that contract managers 


(i) Prepare the contract administration plan; 


Supply Chain Management Policy 





(ii) Monitor the performance of the contractor; 

(iii) Are appointed with appropriate responsibility and 
accountability; 

(iv) Are adequately trained so that they can perform and exercise 
the responsibility; and 

(v) Act with due care and diligence and observe all accounting and 
legal requirements. 


Duties and Powers of Contract Managers 


(a) The contract manager's duties and powers shall be governed by the 
conditions of contract and the general law. 

(b) The contract manager shall also be required to form opinions and 
make decisions, and in doing so is expected to be even-handed and 
prudent. 


Contract Guidelines 


(a) A guideline, which provides a description of the roles and 
responsibilities of a contract manager during the contract 
administration stage, shall be documented. 

(b) This following is not an exhaustive description of contract 
administrative activities, and some tasks may not be carried out in the 
sequence presented, may be done concurrently with other tasks, or 
may not be necessary in some circumstances. 


Delegating to Contract Administrator 


Supply Chain Management Policy 






(a) Where appropriate, a contract manager may delegate some contract 
administration duties to a contract administrator. 

(b) The contract administrator would usually be required to perform 
duties related to processes for record keeping and authorizing 
payment and collecting data on the contractor performance. 

(c) The contract manager will however remain ultimately responsible for 
the performance of the contract. 


Contract Management Process 


(a) The contract manager shall ensure the contractor fulfils its obligations 
and accepts its liabilities under the contract and must also ensure the 
contractors are treated fairly and honestly. 

(b) Both parties adhering to the agreed terms will result in - 

(i) Value for money; 

(ii) Timeliness; 

(iii) Cost effectiveness; and 

(iv) Contract performance. 

Document Retention 


(a) The need exists to retain documents on a contract file for information 
and audit purposes, and in order to comply with the requirements of 
the records office. 


Supply Chain Management Policy 






(12) Records Office 


(a) Proper records regarding all aspects of the contract must accordingly 
be maintained. 


(13) Guidelines on Contract Administration 


(a) The responsibilities of a contract manager may include the following - 

(i) Establishing a contract management plan for the project; 

(ii) Reviewing the contract management process (including the 
plan) on a regular basis; 

(iii) Providing liaison between internal managers and users, and 
suppliers to identify and resolve issues as they arise; 

(iv) Monitoring the contractor's continuing performance 
against contract obligations; 

(v) Providing the contractor with advice and information 
regarding developments within the department, where 
such developments are likely to affect the products 
provided; 

(vi) Determining if staged products should continue, and 
providing a procurement process for additional stages 
which meet the principle of obtaining value for money; 

(vii) Providing accurate and timely reporting to the senior 
management in charge of the project, highlighting 
significant performance issues or problems; 

(viii) Ensuring insurance policy(s) terms and conditions provide 
adequate protection for Drakenstein Municipality and are 
maintained throughout the contract period; 


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(ix) Ensuring all products provided are certified as meeting 
the specifications before the supplier is paid; 

(x) Maintaining adequate records (paper and/or 
electronic) in sufficient detail on an appropriate 
contract file to provide an audit trail; 

(xi) Managing contract change procedures; 

(xii) Resolving disputes as they arise; 

(xiii) Conducting post contract reviews; and 

(xiv) Pursuing remedies in the event of contract breach. 


53. Contracts having budgetary implications beyond three financial years 


(1) Drakenstein Municipality may not enter into any contract that will impose 
financial obligations beyond the three years covered in the annual budget for 
that financial year, unless the requirements of Section 33 of the Municipal 
Finance Management Act have been fully complied with. 

54. Amendment of contracts 


(1) Any increase and / or extension in the approved contract sum, excluding rates 
based tenders which do not have a contract sum, that may become necessary 
as a result of exceptional circumstances during the contract period must be 
considered by the appropriate bid committees and tabled to Council in terms 
of section 116(3) of the Municipal Finance Management Act (Act no. 56 of 
2003) prior to implementation. 

(2) The community must be advised of the proposed amendment and be invited 
to provide written comment within a minimum period of seven (7) days. 


Supply Chain Management Policy 


68 




55. Right of appeal 


(1) In terms of Section 62 of the Municipal Systems Act (Act 32 of 2000 as 
amended), a person whose rights are affected by a decision taken by the 
Municipality, in terms of a delegated authority, in the implementation of its 
supply chain management system, may appeal against that decision by giving 
written notice of the appeal and reasons to the City Manager within 21 days 
of the date of the notification of the decision. 

(2) Notification of the decision in terms of sub-paragraph 55(1) of this policy 
must state that any appeal must be submitted in writing to the City Manager 
and must at least contain the following information: 

(a) The reasons and / or grounds for the appeal; 

(b) The way in which the appellants rights have been affected; and 

(c) The remedy sought by the appellant. 

(3) No award, where a competitive bidding process was followed, shall be 
formally implemented until a ruling has been made on any appeal/s received. 
The City Manager may however grant approval for the implementation of bid 
awards prior to the conclusion of the appeal process in respect of bids which 
in his / her opinion are deemed as urgent. 

(4) The appeal authority must consider the appeal and confirm, vary or revoke 
the decision, but no such variation or revocation of a decision may detract 
from any rights that may have accrued as a result of the decision. 


56. Notification of bid decisions 


(1) The successful and unsuccessful bidders shall be notified in writing by the 
Corporate Services Division once a bid has been accepted. 

(2) The bidders shall, in addition, be advised of the 21 day appeal period in terms 
of Section 62 of the Municipal Systems Act and successful bidders shall be 


Supply Chain Management Policy 


69 




notified that no rights will accrue to them until the appeal process is 
concluded. 

(3) Once the 21 day appeal period has lapsed and a decision has been made by 
the appeal authority, all affected bidders will be notified in writing of the 
outcome thereof by the Municipality. 

57. Unsuccessful bidder debriefing 


(1) The Municipality will offer an unsuccessful bidder debriefing service to 
unsuccessful bidders upon request. 

(2) During the debriefing unsuccessful bidders will be informed of how their 
proposal scored against required criteria and obtain comments from the 
evaluation team on their bid. 

(3) The debriefing should be a positive and constructive experience that explains 
how bidders can improve future submissions. 

(4) The debriefing is an opportunity for unsuccessful bidders to - 

(a) Learn more about the procurement and evaluation process in an 
informal setting; 

(b) Find out how their proposal scored against the required criteria; 

(c) Hear the overall comments from the evaluation team on their bid; and 

(d) Gather information on how future submissions may be improved. 

(5) The debriefing is not part of the Supply Chain complaint or appeal process in 
terms of paragraph 49 or 55 of this Policy. 


Supply Chain Management Policy 


70 




(6) The debriefing is not a legal proceeding and no legal representation is 
permitted at the debriefing session. 

(7) At the debriefing session the unsuccessful bid is not compared to other bids, 
nor will information be provided to the unsuccessful bidder about other bids. 

(8) In scheduling a bidder's debriefings session upon the request of the 
unsuccessful bidder, the municipality must - 

(a) Confirm the date and time of the debriefing session in writing; 

(b) Conduct separate debriefings with each unsuccessful bidder; 

(c) Ensure that proper minutes are kept of each debriefing session; and 

(d) Retain all correspondence and documentation relevant to the 
debriefing session as part of the procurement documentation. 

(9) In conducting bidders' debriefings, the municipality may - 


(a) Provide a general overview of the evaluation process set out in the bid 
documents; 

(b) Discuss the strengths and weaknesses of the bidder's submission in 
relation to the specific evaluation criteria and the bidders evaluated 
score; 

(c) Provide suggestions on how the supplier may improve future 
submissions; and 

(d) Address specific questions and issues raised by the supplier in relation 
to their submission. 


58. Condonation of Policy contraventions 


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71 




(1) Council may condone a contravention in terms of this Policy, provided that 
such contravention is also not a contravention of the MFMA or the Municipal 
Supply Chain Management Regulations, 2005 

(2) Any expenditure relating to such condonation by Council in terms of this 
Policy, will not constitute irregular expenditure as contemplated under 
section 1 of the MFMA. 

(3) Contraventions of the MFMA relating to supply chain management or the 
Municipal Supply Chain Management Regulations, 2005 must be dealt with 
in terms of section 32 and section 170 of the MFMA 


59. Shorttitle 

(1) This policy is called the Drakenstein Municipality Supply Chain Management Policy. 


Supply Chain Management Policy 


72 





DRAKENSTEIN 

MUNISIPALITEIT • MUNICIPALITY • UMASIPALA 
Paarl | Wellington | Gouda I Saron | Simondium 


ravelling and 
Subsistence Policy 


www.drakenstein.gov.za 


A city of excellence 





All expenditure referred to in this policy is against public funds and Councillors and 
Officials are requested to be prudent when incurring any expenditure. 


Travelling and Subsistence Policy 


2 




INDEX 


PAGE 

1. OBJECTIVE OF THE POLICY.4 

2. DEFINITIONS .4 

3. RESPONSIBILITIES OF REPRESENTATIVES WHO TRAVEL ON BUSINESS 

OFTHE MUNICIPALITY.5 

4. SUBSISTENCE AND TRAVEL ALLOWANCE.5 

5. ENTITLEMENT TO A SUBSISTENCE AND TRAVEL ALLOWANCE.6 

6. ACCOMMODATION COSTS AND SUBSISTENCE ALLOWANCE.10 

7. SUBSISTENCE ALLOWANCE IF TRAVEL IS FOR A DAY OR PART OF A 

DAY WITH NO OVERNIGHT STAY.11 

8. SPECIAL DAILY ALLOWANCES FOR OFFICIAL VISITS ABROAD.11 

9. CAR RENTAL AND OTHER TRAVEL COSTS.12 

10. SUBSISTENCE AND TRAVELLING ALLOWANCE FOR PERSONS 

INVITED FOR INTERVIEWS.13 

11. AUTHORISATION.13 

12. LEGAL REQUIREMENTS.13 

13. ANNEXURES.14 

14. TERMS OF REFFERENCE.14 


Travelling and Subsistence Policy - 

3 


















1 . 


OBJECTIVE OF POLICY 


1.1 It is essential that representatives of the Municipality from time to time travel to other cities and 
towns in order to establish and maintain links and relationships with other municipalities, 
government bodies, and other parties, institutions and organizations operating in the sphere of 
local government. 

1.2 It is important for representatives to broaden their knowledge and understanding of and compare 
local experiences in local government transformation, innovation and change in the rest of the 
country, and this can only be done effectively through the medium of personal contact with a wide 
range of local government stakeholders. 

1.3 In terms of the Income Tax Act (No.58 of 1962) councilors and employees traveling to other 
destinations for official business purposes or needs be granted an ad-hoc travel and subsistence 
allowance. 

1.4 The object of this policy is to enforce the promulgated legislation in terms of ad- hoc travel and 
subsistence allowances, in order to set uniform guidelines for councilors and officials of 
Drakenstein Municipality. 

2. DEFIIMITIONS 

2.1 "Councilor" as defined in terms of the Municipal Structures Act (Act 117 of 1998). 

2.2 "Day allowance" is equivalent to the total allowance granted for meals and incidental cost for 24- 
hour period portion thereof to a minimum of 6 hours after the first 24 hours. 

2.3 "Holder ofpublic office" is any member of a municipal council, a member of a provincial House of 
Traditional Leaders and a member of the Council of Traditional Leaders. 

2.4 "Incidental cost" expenses which are not necessarily incurred in performing the duties of 
employment whilst away on business (e.g. telephone cost, laundry cost, drinks, tips etc.). 

2.5 "Meals" any food / refreshment that an employee is entitled to whilst on official Council business 
away from the workplace. 

2.6 "Municipal official", in relation to a municipality or municipal entity, means: 

2.6.1. An employee of a municipality or municipal entity; 

2.6.2. A person seconded to a municipality or municipal entity to work as a member of the staff 


Travelling and Subsistence Policy 


4 




of the municipality or municipal entity; or 


2.6.3. A person contracted by a municipality or municipal entity otherwise than as an employee. 

2.7. "Official duty" approved official council business / activities. 

2.8. "Radius" a straight line extending from the center of a circle to its edge or from the center of a 
sphere to its surface. 

2.9. "Running Costs Tables" means fuel, maintenance and tyre costs. 

2.10. "SARS" South African Revenue Services. 

2.11. "Travel: domestic" for purposes of this policy, domestic travel shall mean travel within South 
Africa. 

2.12. "Travel: international" for purposes of this policy, international travel shall mean travel to any 
country outside South Africa. 

3. RESPONSIBILITIES OF REPRESENTATIVES WHO TRAVEL ON BUSINESS OF THE MUNICIPALITY 

3.1 Every representative who travels on the business of the municipality must comply with this policy 
in letter and in spirit. 

3.2 Representatives who travel on the business of the municipality must appreciate, at all times, that 
they are ambassadors for the municipality, that their actions, conduct and statements must be in 
the best interests of the municipality, and that they must comply with any specific mandates they 
have been given. 

3.3 Consistent with the municipality's performance monitoring and evaluation objectives, the 
municipal manager will ensure that a database of all representatives and official traveling is kept. 

4. SUBSISTENCE AND TRAVEL ALLOWANCE 

4.1 A subsistence and travel allowance is an amount of money paid by the municipality to a 
representative to cover the following expenses: 

4.1.1.Meals (including reasonable gratuities); 

4.1.2.lncidentals such as refreshments, snacks, drinks and newspapers; and 


Travelling and Subsistence Policy 


5 




4.1.3.Business related travel. 


4.2 A subsistence allowance does not cover any personal recreation, such as visits to a gym, cinema, 
theatre, nightclubs or sightseeing. 

4.3 Calculation of the allowances shall be in respect of the period from the latest reasonable time at 
which it would be necessary for the traveler using the authorized form of transport to leave the 
ordinary place of residence or office in order to be present at the appointed time to the earliest 
reasonable time on or about which such traveler could, by using such transport, arrive back at the 
ordinary place of residence or office. 

5. ENTITLEMENT TO A SUBSISTENCE AND TRAVEL ALLOWANCE 

5.1 A representative may claim a daily subsistence allowance as provided in this policy with the 
understanding that all authorized personal expenses are covered by the subsistence allowance. No 
further expenses, with the exception of certain business expenses (see below), may be claimed. 

5.2 The subsistence allowance may be claimed without the representative having to furnish proof of 
expenses. 

5.3 Entertainment of external business associates, contacts, potential investors or clients, falls outside 
the scope of the subsistence allowance and will be separately reimbursed (subject to prior approval 
where applicable). 

5.4 Where an official of the municipality has an entertainment allowance, the entertainment of 
external business associates or contacts or other parties must be claimed against the 
entertainment allowance. 

5.5 A representative of the municipality must claim his or her subsistence allowance, as provided for 
in this policy, before embarking on any official trip. The subsistence allowance must, in order to 
facilitate its timeous payment, be claimed at least seven working days before the planned trip. 

5.6 No subsistence allowance will be paid, and no representative will be entitled to a subsistence 
allowance, if the trip or travel is not related to the official business of the municipality. 

5.7 All traveling on business of the municipality must be approved as such before a representative is 
entitled to a subsistence allowance. 

5.8. Reimbursement for official trips undertaken by staff members with private vehicles are divided 
into five categories:- 


Travelling and Subsistence Policy 


6 




5.8.1. Category 1 

Trips by Section 56 appointees who report directly to the Municipal Manager as well as 
other fixed term employment contract staff who structured a vehicle allowance as part of 
their total employment contract; 

5.8.2. Category 2 

Trips undertaken by permanent staff who receive a fixed vehicle allowance as part of their 
remuneration; 

5.8.3. Category 3 

Permanent staff who receive a vehicle allowance as part of the Essential Users Scheme by 
virtue of the fact that they use their private vehicle for official trips on a daily basis; 

5.8.4. Category 4 

Permanent staff other than those mentioned in the above categories who use their private 
vehicles for official trips on occasional basis; 

5.8.5. Category 5 
Councillors. 

5.9. Staff members in Category 1 and 2 :- 

5.9.1. Staff members in these categories will be reimbursed for trips outside the municipal area 
and for official trips to Saron and Gouda within the municipal area where the total of such 
trips calculated on a calendar month basis, exceeds 500 km; 

5.9.2. The distances claimed for the aforementioned trips, must be based on the fixed distances 
reflected in the table below as calculated from the Head Office: 


Destination 

Km distance (both directions) 

Stellenbosch 

65 

Malmesbury 

97 

Somerset-West 

102 

Gouda 

110 


Travelling and Subsistence Policy 


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Worcester 

112 

Saron 

146 

Cape Town 

148 

Ceres 

170 

Caledon 

202 

Robertson 

204 

Yzerfontein 

210 

Piketberg 

220 

Swellendam 

230 

Montagu 

260 

Hermanus 

266 

Langebaan 

276 

Vredenburg 

284 

Verlddrif 

288 

Citrusdal 

288 

St Helena Bay 

316 

Gans Bay 

346 

Bredasdorp 

350 

Clanwilliam 

400 

Laingsburg 

422 

L'Agulhas 

422 

Lamberts Bay 

484 

Riversdale 

516 

Calitzdorp 

639 

Mossel Bay 

668 

Oudtshoorn 

730 

George 

756 

Beaufort-West 

812 

Knysna 

876 

Plettenberg Bay 

942 


Travelling and Subsistence Policy 


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5.9.3. Any other approved official trips to destinations which are not reflected above will be 
reimbursed on a basis of distance travelled provided such distances are calculated from the 
actual point of departure if it is less than the distance from Head Office, or is calculated 
from Head Office if it is more than the distance from Head Office. 

5.9.4. Reimbursement will be calculated on the official Running Costs Tables (fuel, maintenance, 
tyre costs) of the "AA Rates for Vehicle Operating Costs" for the specific vehicle used; 

5.9.5. Official business trips outside the municipal area, must be prior approved as per the 
attached form "Prior Approval to Undertake Official Business Trip with Private Vehicle". 
Duly completed forms must be attached to calendar month claims for reimbursement as 
per the attached form "Private Vehicle Official Business Trip Monthly Claim Form". 

5.10. Staff members in Category 3 

Staff receiving a fixed monthly allowance calculated at the official Running Costs Tables of the 
"Essential User Scheme: Transport Allowance" as applicable for that specific user, as amended 
from time to time by the Bargaining Council. 

5.11. Staff members in Category 4 

Staff other than those mentioned in paragraph 5.9 and 5.10 will be reimbursed at the SARS rate 
as announced and gazetted annually in February by the Minister of Finance provided that the 
distance to which the travel claim relates must be the shortest distance between the points of 
departure and arrival. This will only be applicable if municipal transport is not available. 

5.12. Councillors - Category 5 

Councillors will be reimbursed for prior approved trips outside the municipal area at the rate 
determined by the Department of Transport's Notice: "Tariffs forthe use of Motor Transport" as 
distributed monthly by the Department of Local Government and Housing, subject to the Upper 
Limits of Salaries, Allowances and Benefits of Councillors promulgated annually. 

5.13. All claims for reimbursement must be submitted on a monthly basis and must be accompanied by 
the duly completed prior approval forms for trips. 

5.14. The stipulations of this policy as far as it relates to reimbursement for approved official trips, will 
prevail over any other policy stipulation that may be in conflict with the above. 


Travelling and Subsistence Policy 


9 







6 . 


ACCOMMODATION COSTS AND SUBSISTENCE ALLOWANCE 


6.1 Representatives who travel on the business of the municipality, where the business unavoidably 
entails one or more nights to be spent away from home, may stay in a hotel, motel, guesthouse 
or bed and breakfast establishment. Although the policy does not specify any grading for the 
specific accommodation required, representatives must refrain from any extravagance. But 
certainly the accommodation should be of an acceptable standard for all municipal delegations. 
Selection of accommodation must however be judged on availability, location, suitability, safety, 
etc. 

6.2 Where such accommodation is available, the rate for a single room will be payable. 

6.3 A daily allowance, at the SARS rate, to defray incidental costs only (deemed to have been 
expended) will be paid in advance to the amount as announced and gazetted annually in 
February by the Minister of Finance, to the recipient where the official business trip is in the 
Republic of South Africa (domestic travel). Any amount over and above the prescribed amount, if 
for whatever reason approved by Council, will be taxable. 

6.4 A daily allowance, at the SARS rate, to defray meals and incidental costsjdeemed to have been 
expended) will be paid in advance to the amount as announced and gazetted annually in 
February by the Minister of Finance, to the recipient where the official business trip is in the 
Republic of South Africa (domestic travel) and that the representative needs to stay overnight for 
the purpose traveled for. Any amount over and above the prescribed amount, if for whatever 
reason approved by Council, will be taxable. 

6.5 If a representative stays with a relative or friend, no accommodation allowance may be claimed, 
however, the representative may, in addition to the applicable subsistence allowance, claim a 
Taxable amount of R 200.00 (Two Flundred Rand) per day. 

6.6 Employees or holders of public office would only be allowed to claim for accommodation if the 
destination is beyond a radius of 100 kilometres from the municipal area, save for 
accommodation in Cape Town for representatives who travel from areas other than Cape Town. 

6.7 Where it is not necessary to sleep overnight on any travel for municipal business, no 
accommodation costs will be paid, but only incidental costs can be claimed for. 

6.8 In cases where Council's official Travel Agent did not make the reservation, payments of 
overnight accommodation for representatives shall be paid directly into the account of the hotel 
or guesthouse. Requests for reservations and payment must be submitted by the relevant official 
at least seven days prior to embarking on an official trip to enable the administration sufficient 
time to process the reservation and payment. This is to avoid unnecessary inconvenience to all 


Travelling and Subsistence Policy 


10 




parties concerned. 


6.9 In the event where an official is unable to make use of the meals provided due to religious 

convictions, the reimbursement for alternative meals shall be dealt with on an ad hoc basis with 
the authorisation of the Municipal Manager or his/her delegated authority. (See paragraph 11.1) 

7. SUBSISTENCE ALLOWANCE IF TRAVEL IS FOR A DAY OR PART OF DAY WITH NO OVERNIGHT 
STAY (No "out of office" subsistence will be paid to any Councillor or Official on any visits 
within the boundaries of the Drakenstein Municipality) 

7.1 If a representative is on the business of the municipality outside the boundaries of the 
Drakenstein Municipality for a day or part of a day in circumstances not requiring the night to be 
spent away (absence of more than 6 hours and less than 24 hours), a subsistence allowance as 
per paragraph 6.3 is payable per day, irrespective of the number of trips undertaken. No 

subsistence allowance will be payable to representatives attending courses and seminars 
where all their physical needs are catered for. 

7.2 Miscellaneous expenses including laundry, bus fares, toll and parking fees shall be paid by the 
Municipality upon submission of proof, both within and outside the boundaries of South Africa. 

Foreign expenditure shall be linked to the applicable exchange rate. 

8. SPECIAL DAILY ALLOWANCES FOR OFFICIAL VISITS ABROAD 

8.1 Any representative embarking on an overseas visit must request his/her subsistence allowance 
not later than 7 (seven) working days before actual date of departure. For consistency, the value 
of the subsistence will be calculated against an exchange rate obtained from Council's official 
bankers as listed five (5) working days before the actual departure date indicated on the plane 
ticket or reservation which must accompany the request for subsistence. This exchange rate will 
be according to the currency of the specific country to be visited. 

8.2 Council will reimburse the costs of visas for countries to be visited in accordance with the official 
visit. 

8.3 An allowance as stipulated by the SARS schedule will be paid in advance to the amount as 
announced and gazetted annually in February by the Minister of Finance, to the recipient where 
the official business trip is outside the Republic of South Africa (ANNEXURE 13(iii)). The 
allowance or advance is paid or granted to defray the cost of meals and incidental costs (deemed 
to have been expended). Any amount over and above the amount as announced and gazetted 
annually in February by the Minister of Finance, for this purpose, will be taxable. (ANNEXURE 
13(ii)(a)). 


Travelling and Subsistence Policy 


11 




8.4 The reasonable actual miscellaneous expenses will be refunded against proof (receipt/invoice) of 
payment as approved per paragraph 11.1. 

8.5 On return from overseas visits the representatives must submit to the next Council meeting a 
written report, which may be a collective exercise, regarding the value, experience and benefits 
achieved. It will be the responsibility of Administration to forward the report, with Council 
resolution and any comments, to the Executive Director: Finance. (Refer to paragraph 12.2) 

9. CAR RENTAL AND OTHER TRAVEL COSTS 

In all cases the most economical way of transport must be utilized. 

9.1 Only category "A" or "B" vehicles may be rented, unless it is more cost effective to hire a more 
expensive vehicle, for example; where the number of representatives involved could justify the 
hire of a microbus. Exception to this rule will necessitate the Municipal Manager's approval. 

9.2 Car rental must be approved as part of the travel package before the trip is embarked on. 

9.3 A representative who rents a vehicle whilst traveling on the business of the municipality without 
having received authorization will only be reimbursed for the cost of the rented vehicle if proof of 
expenditure can be produced, the representative can demonstrate that the vehicle was 
necessitated under the circumstances, the cost was reasonable and condoned by the Municipal 
Manager or his/her delegated authority per paragraph 11.1. 

9.4 All flights taken by the representatives of the municipality shall be in the Economy class. However, 
in cases where the Executive Mayor, the Deputy Executive Mayor, councillors, the Municipal 
Manager and Executive Directors form part of or accompany ministerial delegations, they be 
allowed to fly business class. 

9.5 If a representative has to utilize his/her personal motor vehicle outside the boundaries of 
Drakenstein municipality, he/she will be reimbursed per kilometer as applicable per paragraph 
5.11. Where the total number of kilometers for which such reimbursement is received exceeds 
8,000 in a tax year, reimbursement for the excess kilometers over 8,000 must be taxed for PAYE 
purposes (ANNEXURE 13(ii)(b)). 

9.6 The distance to which the reimbursement applies, must be the shortest distance between the 
departure and arrival points. 

9.7 Where the possibility arises, representatives must travel together, up to a maximum of four people 
per vehicle, to minimize traveling expenses. 

9.8 No DAILY allowance will be paid to any Councilor or Official for traveling costs on any visits within 
the Drakenstein Municipality boundaries. 


Travelling and Subsistence Policy 


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10. SUBSISTENCE AND TRAVELLING ALLOWANCE FOR PERSONS INVITED FOR INTERVIEWS 

10.1 No subsistence costs will be paid to any candidate invited for an interview, unless specifically 
authorized by the Municipal Manager or his/her delegated authority as per paragraph 11.1. 
However, traveling costs may be paid if the candidate has to travel more than 50 kilometers to 
attend an interview as per paragraph 5.11. 

11. AUTHORISATION 

11.1 For purposes of implementing this policy any approval for subsistence or visits outside the boarders 
of the Drakenstein Municipality must be in accordance with Council's existing delegated powers 
and functions. 

11.2 An invitation to attend a workshop, meeting or related event is not an automatic authorization to 
attend such a workshop or event. The required authorization must still be obtained from the 
Municipal Manager or the Executive Mayor together with his/her Mayoral Committee, as the case 
may be. (See paragraph 11.1). 

11.3 Representatives to any conference, workshop or meeting must ensure that they arrive on time and 
attend until the conclusion of such event. If any representative fails to do so, the Executive Mayor 
together with his/her Mayoral Committee or the Municipal Manager, as the case may be, may 
recover all allowances and disbursements paid to enable said representative to attend such event, 
provided that said representative is afforded an opportunity to submit reasons for not being able 
to be present from the commencement to conclusion of such event. (See paragraph 12) 

12. LEGAL REQUIREMENTS 

12.1 In terms of section 66 of the Local Government: Municipal Finance Management Act (No. 56 of 
2003), the Accounting Officer must report to Council, in the format and for the periods prescribed, 
all expenses relating to staff salaries, allowances and benefits, separately disclosing, inter alia, 
travel, subsistence and accommodation allowances paid. 

12.2 If the report indicated in paragraph 8.5 is not submitted in due course or the representatives did 
not embark on the official overseas visit, the total cost incurred by Council for that specific visit, 
must be reported as fruitless and/or wasteful expenditure. 

12.3 Should, for whatever reason, late minute traveling or accommodation changes be effected, the 
revenue lost or penalties paid, due to cancellation or new reservations, must be reported as 
fruitless and/or wasteful expenditure. 


Travelling and Subsistence Policy 


13 




13. THE FOLLOWING ANNEXURES FORM PART OF THIS POLICY AND MUST BE REVISED ANNUALLY 
AND REPLACE REDUNDANT DOCUMENTS. 

13.1. AA Rates For Vehicle Operating Costs. http://www.aa.co.za/Channels Go to: Advice & 
Information / Vehicle Running Costs / Newest Publication. 

13.2. Government Gazette: "Determination Of The Daily Allowance In Respect Of Meals And Incidental 
Costs For Purposes Of Section 8(1) Of The Income Tax Act, 1962 (Act 58 of 1962)" annually 
published by the Minister of Finance. http://www.sars.gov.za/home. asp?pid=3498 

13.3. Tax Pocket Guide - Published on the day of the Budget Speech. 
http://www.sars.gov.za/home. asp?pid=4150&tid=658ts=pubs &show=812 

13.4. The schedule published by the Department of Public Service and Administration (DPSA), 
"Accommodation On Official Journeys Outside The Republic" which is vested in the Public Service 
Act, No.103 of 1994, as amended and the Regulations thereto. 

13.5. The Department of Transport's Notice: "Tariffs for the use of Motor Transport" vested in the 
"Remuneration of Public Office Bearers Act, No.20 of 1998" and distributed monthly by the 
Department of Local Government and Housing. 

13.6. "Essential User Scheme: Transport Allowance" as circulated by the Western Cape Division of the 
South African Local Government Bargaining Council. 

13.7. Exchange rate applicable 

Exchange rate applicable will be the one provided by the bank at the time of the payment (at least 
five (5) days before departure). 

13.8. Any exception to the rule must be authorized by the Accounting Officer or his delegate. 

14. TERMSOF REFERENCE 

14.1. Income Tax Act (No. 58 of 1962) 

14.2. Labour Relations Act (No. 66 of 1995) 

14.3. Municipal Structures Act (No. 117 of 1998) 

14.4. Guidelines for Employers, 2005, South African Revenue Services 


Travelling and Subsistence Policy 


14 





14.5. Municipal Systems Act (No. 32 of 2000) 

14.6. Municipal Finance Management Act (No.56 of 2003) 

14.7. BudgetSpeech 


Travelling and Subsistence Policy 




DRAKENSTEIN MUNICIPALITY 


PRIOR APPROVAL TO UNDERTAKE OFFICIAL BUSINESS TRIP OUTSIDE 

THE MUNICIPAL AREA (SARON / GOUDA INCLUDED) WITH PRIVATE VEHICLE 


. (Name) being 

employed as . (Designation) in the 

. Directorate is hereby 

granted approval to use his/her private motor vehicle to 
.(destination) and back for the purposes of 


Date left:. 

Kilometers ciaimed:. 

Fuel supply (petrol/diesel): 


Date returned: .. 
Engine capacity: 


OFFICIAL 

SIGNATURE:. DATE: 


APPROVED BY: DESIGNATION: 


SIGNATURE:. DATE: 


AUTHORITY TO APPROVE : MANAGERS MAY APPROVE OFFICIAL TRIPS FOR ALL SUB-ORDINATE STAFF 
AND EXECUTIVE MANAGERS MAY APPROVE OFFICIAL TRIPS OF MANAGERS AND SENIOR MANAGERS 


Travelling and Subsistence Policy 


16 




























DRAKENSTEIN MUNICIPALITY 


PRIVATE VEHICLE OFFICIAL BUSINESS TRIP MONTHLY CLAIM FORM 


Vehicle Registration Number: 

Vehicle Name and Model: 

Engine Capacity: 

Fuel Supply: Petrol / Diesel 

Date 

Destination 

Km’s 

Claimed 































Total Kilometers Travelled 


Less: First 500 km’s 

500 

Kilometers Claimable 


Payroll Number 

Official’s Name 

Designation 

Date 

Signature 






Official’s Name 

Designation 

Approved (Yes/No) 

Date 

Signature 







FOR OFFICIAL CALCULATION BY PAYROLL OFFICE 

Kilometers Claimable 


Running Cost Tariff Payable per Kilometer 


Total Rand Value Payable 



Travelling and Subsistence Policy 


17 






































SOUTH AFRICAN REVENUE SERVICE 


NO. 268 


01 MARCH 2019 


DETERMINATION OF THE DAILY AMOUNT IN RESPECT OF 
MEALS AND INCIDENTAL COSTS FOR PURPOSES OF SECTION 
8(1) OF THE INCOME TAX ACT, 1962 (ACT NO. 58 OF 1962) 

By virtue of the powers vested in me by section 8(1)(c,)(ii) of the Income Tax 
Act, 1962 (Act No. 58 of 1962), I, Mark Stanley Kingon, Acting Commissioner 
for the South African Revenue Service, hereby determine in the Schedule 
hereto the amounts which shall be deemed to have been actually expended 
by a person in respect of meals and incidental costs for the purposes of 
section 8{^)(a){\)(bb) of that Act. 

The amounts determined in this notice apply in respect of the year of 
assessment commencing 1 March 2019. 



MS KINGON 

ACTING COMMISSIONER FOR THE SOUTH AFRICAN REVENUE 
SERVICE 


Travelling and Subsistence Policy 


18 





SCHEDULE 


1. Unless the context otherwise indicates, any word or expression to 
which a meaning has been assigned in the Income Tax Act, 1962, 
bears the meaning so assigned. 

2. The following amounts will be deemed to have been actually expended 
by a recipient to whom an allowance or advance has been granted or 
paid— 

(a) where the accommodation, to which that allowance or advance 
relates, is in the Republic and that allowance or advance is paid or 
granted to defray— 

(i) incidental costs only, an amount equal to R134.00 per day; or 

(ii) the cost of meals and incidental costs, an amount equal to 
R435.00 per day; or 

(b) where the accommodation, to which that allowance or advance 
relates, is outside the Republic and that allowance or advance is paid 
or granted to defray the cost of meals and incidental costs, an amount 
per day determined in accordance with the following table for the 
country in which that accommodation is located— 


Table: Daily Amount for Travel Outside the Republic 


Country 

Currency 

Amount 

Albania 

Euro 

97 

Algeria 

Euro 

110 

Angola 

US$ 

303 

Antigua and Barbuda 

US$ 

220 

Argentina 

US$ 

133 

Armenia 

US$ 

220 

Austria 

Euro 

131 

Australia 

A $ 

230 

Azarbaijani 

US$ 

145 

Bahamas 

US$ 

191 

Bahrain 

B Dinars 

36 

Bangladesh 

US$ 

79 


Travelling and Subsistence Policy 


19 



















Barbados 

US$ 

202 

Belarus 

Euro 

62 

Belgium 

Euro 

146 

Belize 

US$ 

152 

Benin 

Euro 

89 

Bolivia 

US$ 

78 

Bosnia-Herzegovina 

Euro 

75 

Botswana 

Pula 

826 

Brazil 

Reals 

347 

Brunei 

US$ 

88 

Bulgaria 

Euro 

91 

Burkina Faso 

CFA Francs 

58 790 

Burundi 

Euro 

73 

Cambodia 

US$ 

99 

Cameroon 

Euro 

116 

Canada 

C$ 

167 

Cape Verde Islands 

Euro 

65 

Central African Republic 

Euro 

94 

Chad 

Euro 

121 

Chile 

US$ 

128 

China (People's Republic) 

US$ 

127 

Colombia 

US$ 

94 

Comoro Island 

Euro 

122 

Cook Islands 

NZ $ 

211 

Cote D'lvoire 

Euro 

119 

Costa Rica 

US$ 

116 

Croatia 

Euro 

102 

Cuba 

US$ 

124 

Cyprus 

Euro 

117 

Czech Republic 

Euro 

90 

Democratic Republic of 

Congo 

US$ 

164 

Denmark 

Danish Kroner 

2 328 

Djibouti 

US$ 

99 

Dominican Republic 

US$ 

99 

Ecuador 

US$ 

163 

Egypt 

US$ 

118 

El Salvador 

US$ 

98 

Equatorial Guinea 

Euro 

166 


Travelling and Subsistence Policy 


20 















































Eritrea 

US$ 

109 

Estonia 

Euro 

92 

Ethiopia 

US$ 

92 

Fiji 

US$ 

102 

Finland 

Euro 

171 

France 

Euro 

128 

Gabon 

Euro 

172 

Gambia 

Euro 

74 

Georgia 

US$ 

95 

Germany 

Euro 

120 

Ghana 

US$ 

130 

Greece 

Euro 

134 

Grenada 

US$ 

151 

Guatemala 

US$ 

114 

Guinea 

Euro 

78 

Guinea Bissau 

Euro 

59 

Guyana 

US$ 

118 

Haiti 

US$ 

109 

Honduras 

US$ 

186 

Hong Kong 

Hong Kong $ 

1 000 

Hungary 

Euro 

89 

lceland 

ISK 

25 466 

India 

Indian Rupee 

5 852 

Indonesia 

US$ 

86 

Iran 

US$ 

120 

Iraq 

US$ 

125 

Ireland 

Euro 

139 

Israel 

US$ 

209 

Italy 

Euro 

125 

Jamaica 

US$ 

151 

Japan 

Yen 

16 275 

Jordan 

US$ 

201 

Kazakhstan 

US$ 

141 

Kenya 

US$ 

138 

Kiribati 

Australian $ 

233 

Korea, Republic 

Korean Won 

187 735 

Kuwait (State of) 

Kuwait Dinars 

51 

Kyrgyzstan 

US$ 

172 

Laos 

US$ 

92 


Travelling and Subsistence Policy 


21 















































Latvia 

US$ 

150 

Lebanon 

US$ 

158 

Lesotho 

RSA Rand 

750 

Liberia 

US$ 

112 

Libya 

US$ 

120 

Lithuania 

Euro 

154 

Macao 

Hong Kong $ 

1 196 

Macedonia (Former Yugoslav) 

Euro 

100 

Madagascar 

Euro 

59 

Madeira 

Euro 

290 

Malawi 

Malawi Kwacha 

31 254 

Malaysia 

Ringgit 

382 

Maldives 

US$ 

202 

Mali 

Euro 

178 

Malta 

Euro 

132 

Marshall Islands 

US$ 

255 

Mauritania 

Euro 

97 

Mauritius 

US$ 

135 

Mexico 

Mexican Pesos 

1 313 

Moldova 

US$ 

117 

Mongolia 

US$ 

69 

Montenegro 

Euro 

94 

Morocco 

Dirhams 

970 

Mozambique 

US$ 

128 

Myanmar 

US$ 

123 

Namibia 

RSA Rands 

950 

Nauru 

Australian $ 

278 

Nepal 

US$ 

64 

Netherlands 

Euro 

117 

New Zealand 

NZ $ 

191 

Nicaragua 

US$ 

90 

Niger 

Euro 

75 

Nigeria 

US$ 

242 

Niue 

New Zealand $ 

252 

Norway 

NOK 

1 760 

Oman 

Rials Omani 

77 

Pakistan 

Pakistani Rupees 

6 235 

Palau 

US$ 

252 


Travelling and Subsistence Policy 


22 














































Palestine 

US$ 

147 

Panama 

US$ 

105 

Papa New Guinea 

Kina 

285 

Paraguay 

US$ 

76 

Peru 

US$ 

139 

Philippines 

US$ 

122 

Poland 

Euro 

88 

Portugal 

Euro 

87 

Qatar 

Qatar Riyals 

715 

Republic of Congo 

Euro 

149 

Reunion 

Euro 

164 

Romania 

Euro 

85 

Russia 

Euro 

330 

Rwanda 

US$ 

101 

Samoa 

Tala 

193 

Sao Tome & Principe 

Euro 

160 

Saudi Arabia 

Saudi Riyals 

517 

Senegal 

Euro 

113 

Serbia 

Euro 

83 

Seychelles 

Euro 

275 

Sierra Leone 

US$ 

90 

Singapore 

Singapore $ 

232 

Slovakia 

Euro 

102 

Slovenia 

Euro 

106 

Solomon Islands 

Sol Islands $ 

1 107 

South Sudan 

US$ 

265 

Spain 

Euro 

112 

Sri Lanka 

US$ 

100 

St. Kitts & Nevis 

US$ 

227 

St. Lucia 

US$ 

215 

St. Vincent & The Grenadines 

US$ 

187 

Sudan 

US$ 

200 

Suriname 

US$ 

107 

Swaziland 

RSA Rand 

818 

Sweden 

Swedish Kronor 

1 317 

Switzerland 

S Franc 

201 

Syria 

US$ 

185 

Taiwan 

New Taiwan $ 

3 505 

Tajikistan 

US$ 

97 


Travelling and Subsistence Policy 


23 















































Tanzania 

US$ 

129 

Thailand 

Thai Baht 

4 956 

Togo 

CFA Francs 

64 214 

Tonga 

Pa'anga 

251 

Trinidad & Tobago 

US$ 

213 

Tunisia 

Tunisian Dinar 

198 

Turkey 

Euro 

101 

Turkmenistan 

US$ 

125 

Tuvalu 

Australian $ 

339 

Uganda 

US$ 

111 

Ukraine 

Euro 

131 

United Arab Emirates 

UAE Dirhams 

699 

United Kingdom 

British Pounds 

102 

Uruguay 

US$ 

144 

USA 

US$ 

146 

Uzbekistan 

Euro 

80 

Vanuatu 

US$ 

166 

Venezuela 

US$ 

294 

Vietnam 

US$ 

146 

Yemen 

US$ 

94 

Zambia 

US$ 

119 

Zimbabwe 

US$ 

123 




Other countries not listed 

US$ 

215 


Travelling and Subsistence Policy 


24 

































DRAKENSTEIN 

MUNISIPALITEIT • MUMICIPALITY • UMASIPALA 
Paarl | Wellington | Gouda I Saron | Simondium 


Customer Care, Credit 
Control Debt 
Collection & Indigent 
Support Policy 


www.drakenstein.gov.za 


A city of excellence 





CONTENTS 


1. DEFINITIONS 3 

2. GENERAL OBJECTIVES 6 

3. PRINCIPLES 6 

4. DUTIES AND FUNCTIONS 7 

5. PERFORMANCE EVALUATION (ANNEXURE "A") 11 

6. REPORTING 12 

7. CUSTOMER CARE POLICY 12 

8 CREDIT CONTROL POLICY 19 

9. DEBT COLLECTION POLICY 24 

10. MUNICIPAL EMPLOYEES AND COUNCILLOR DEBT 27 

11. INDIGENT AND FINANCIAL SUPPORT POLICY 28 

ANNEXURE A: REVENUE COLLECTION TARGETS 35 

ANNEXURE B: ARRANGEMENTS 38 

ANNEXURE C: APPLICATION FORM FOR INDIGENT HOUSEHOLDS 42 

ANNEXURE D: INDIGENT HOUSEHOLD SUPPORT SCHEME 45 

ANNEXURE E: APPLICATION FOR MUNICIPAL SERVICES 46 


Customer Care, Credit Control, Debt Collection and Indigent Support Policy 


2 






1. DEFINITIONS 

1.1 For the purpose of this policy, the wording or any expression has the same meaning 
as contained in the Act, except where clearly indicated otherwise: 

1.1.1 "Act" The Local Government Act: Systems Act, No 32 of 2000 as amended from time 
to time. 

1.1.2 "Authorised representative" means a person or instance legally appointed by the 
Council to act or to fulfil a duty on its behalf. 

1.1.3 "Chief Financial Officer" means the person appointed by Council to administer its 
finances. 

1.1.4 "Child headed households" means a household where the main caregiver of said 
household is not older than 18 years of age and is still a child as defined in section 
28(3) of the Constitution. 

1.1.5 "Client" means a customer or occupier of a property who is receiving a municipal 
account or owner of the property. 

1.1.6 "Council" means the Municipal Council of Drakenstein Municipality. 

1.1.7 "Customer" means any occupier of any property to which the municipality has 
agreed to supply services or already supplies services to, including an occupier who 
only pays for water and electricity or failing such an occupier, then the owner of the 
property. 

1.1.8 "Defaulter" means a person who owes money to the municipality after the due date 
has expired. 

1.1.9 "Director" means a person appointed by Council in terms of Section 56(a) of the Act 
as a manager directly accountable to the City Manager. 

1.1.10 "Disconnection of electricity supply" means the physical disconnection of 
conventional or pre-paid electricity supply or the 100% blocking of pre-paid 
electricity supply. 

1.1.11 "Disconnection of water supply" means the restriction of the water supply via a 
trickle system. 


Customer Care, Credit Control, Debt Collection and Indigent Support Policy 


3 




1.1.12 "Engineer" means the person in charge of the civil and / or electrical component of 
the municipality. 

1.1.13 "Equipment" means a building or other structure, pipe, pump, wire, cable, meter, 
engine or any accessories. 

1.1.14 "Interest" means a charge levied with the same legal priority as service fees and 
calculated at a rate determined by Council from time to time on arrear monies, based 
on a full month, where part of a month must be deemed as a full month. 

1.1.15 "Late Payment" means the amount due to be paid to the municipality does not 
reflect on municipal bank account on the applicable due date. 

1.1.16 "Household" means all persons (registered owner/s, occupier/s, vulnerable 

person/s or tenant/s) jointly living on a stand or site receiving sanitation, refuse 

removal, water and/or electricity services that is billed by the Municipality. 


1.1.17 "Household income" means the gross sum of all monthly income from all sources 

including wages, salaries, profits, dividends, pensions, rentals, board & lodging, 

interest received, grants or investment income and other forms of earnings 

received by all persons residing on the property. 

1.1.18 "Municipality" means the institution that is responsible for the collection of funds 
and the provision of services to the customers of Drakenstein. 

1.1.19 "Municipal account" means an account rendered specifying charges for services 
provided by the municipality, or any authorised and contracted service provider, 
and / or assessment rates levies. 

1.1.20 "City Manager" means the person appointed as City Manager in terms of section 82 
of the Local Government: Structures Act, 1998, No 117 of 1998, and include any 
person acting in that position or to whom authority was delegated. 

1.1.21 "Municipal services" means those services provided by the Municipality, such as, 
inter alia the supply of water and electricity, refuse removal, sanitation treatment, 
and for which services charges are levied. 

1.1.22 "Occupier" means any person who occupies any property or part thereof, without 
taking cognisance of the title in which he or she occupies the property. 


Customer Care, Credit Control, Debt Collection and Indigent Support Policy 


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1.1.23 "Owner" means: 


(a) The person in whose name the property is legally vested; 

(b) In the case where the person in whose name the property is vested, is insolvent 
or deceased, or is disqualified in terms of any legal action, the person who is 
responsible for administration or control of the property as curator, trustee, 
executor, administrator, legal manager, liquidator, or any other legal 
representative; 

(c) In the case where Council are unable to establish the identity of such person, 
the person who are entitled to derive benefit from the property or any buildings 
thereon; 

(d) In the case of a lease agreement in excess of 30 years was entered into, then 
the lessee; 

(e) Regarding: 

(i) A portion of land allotted on a sectional title plan and which is registered 
in terms of the Sectional Title Act, No 95 of 1986, without limiting it to 
the developer or managing body to the communal property; 

(ii) A portion as defined in the Sectional Title Act, the person in whose name 
that portion is registered in terms of a "sectional title", including the 
legally appointed representative of such person; 

(f) Any legal entity including but not limited to: 

(i) A company registered in terms of the Companies Act, No 61 of 1973; a 
trust inter vivos; a trust mortis causa; a closed corporation registered in 
terms of the Close Corporation Act, No 69 of 1984; and, any voluntary 
organisation; 

(ii) Any provincial or national government department, and a local 
authority; 

(iii) Any council or management body established in terms of any legal 
framework applicable to the Republic of South Africa; and 

(iv) Any embassy or other foreign entity. 


Customer Care, Credit Control, Debt Collection and Indigent Support Policy 


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1.1.24 "Property" any portion of land, of which the boundaries are determined, within the 
jurisdiction of the Municipality, including in the case of sectional title schemes, a 
sectional title unit as defined in the Sectional title Act, No 95 of 1986. 

1.1.25 “Tenant" a person who occupies land or property rented from a landlord 

2. GENERAL OBJECTIVES 

2.1.1 The objectives of this policy are: 

(a) To provide a framework within which the Municipality can exercise its 
executive and legislative authority with regard to credit control and debt 
collection; 

(b) To ensure that all monies due and payable to the Municipality are collected and 
used to deliver services in the best interest of the community; residents and 
consumers; and, in a financially sustainable manner; 

(c) To provide a framework for customer care; 

(d) To describe credit control measures and sequence of events; 

(e) To outline debt collection procedures and mechanisms; 

(f) To determine indigent relief measures; and 

(g) To set realistic targets for debt collection. 

3. PRINCIPLES 

3.1 The administrative integrity of the Municipality must be maintained at all costs. The 
democratically elected councillors are responsible for policy-making, while it is the 
responsibility of the City Manager to ensure the execution of these policies. 

3.2 All customers must complete an official application form, formally requesting the 
Municipality to connect them to service supply lines. Existing customers may be 
required to complete new application forms from time to time, as determined by the 
City Manager. 

3.3 A copy of the application form, conditions of services and extracts of the relevant 
council's Customer Care, Credit Control, Debt Collection and Indigent Support Policy 
and by-laws must be handed to every customer on request at such fees as may be 
determined by Council from time to time. 

3.4 Billing is to be accurate, timeously and understandable. 


Customer Care, Credit Control, Debt Collection and Indigent Support Policy 


6 




3.5 The customer is entitled to reasonable access to pay points and to a variety of reliable 
payment methods. 

3.6 The customer is entitled to an efficient, effective and reasonable response to appeals. 

3.7 Enforcement of payment must be prompt, consistent and effective. 

3.8 Unauthorised consumption, connection and reconnection, the tampering with or 
theft of meters, service supply equipment and the reticulation network and any 
fraudulent activity in connection with the provision of municipal services will lead to 
disconnections, penalties, loss of rights and criminal prosecutions. 

3.9 Incentives and disincentives determined by Council from time to time may be used 
in collection procedures. 

3.10 The collection process must be cost-effective. 

3.11 Results will be regularly and efficiently reported by the Executive Mayor and Mayoral 
Committee to Council. 

3.12 Application forms will be used to, inter alia, categorise customers according to credit 
risk and to determine relevant levels of services and deposits required. 

3.13 Targets for performance in both customer service and debt collection will be set and 
pursued and remedies implemented for non-performance. 

3.14 The principle of paying for services instead of payment for arrear accounts is 
supported. 

3.15 Consumers that meet Council's indigent criteria must be identified and supported. 

4. DUTIES AND FUNCTIONS 

4.1. Duties and functions of Council 

4.1.1. To approve a budget consistent with the needs of communities, ratepayers and 
residents. 

4.1.2. To impose rates and taxes and to determine service charges, fees and penalties to 
finance the budget. 


Customer Care, Credit Control, Debt Collection and Indigent Support Policy 


7 





4.1.3. To facilitate sufficient funds to give access to basic services for the poor. 

4.1.4. To provide for bad debt provision, in line with the payment record of the community, 
ratepayers and residents, as reflected in the financial statements of the Municipality. 

4.1.5. To set an improvement target for debt collection, in line with acceptable accounting 
ratios and the ability of the Implementing Authority. Section 100 of the Act defines 
the Implementing Authority as the City Manager or service provider appointed by the 
Municipality collect outstanding debt. 

4.1.6. To approve a reporting framework for customer care, credit control and debt 
collection. 

4.1.7. To consider and approve by-laws to give effect to this policy. 

4.1.8. To monitor the performance of the City Manager via the Executive Mayor and 
Mayoral Committee (Supervising Authority) regarding customer care, credit control, 
debt collection and indigent support. 

4.1.9. To revise the budget should the targets for Council's customer care, credit control, 
debt collection and indigent support not be met. 

4.1.10. To revise the budget should the targets for Council's customer care, credit control, 
debt collection and indigent support not be met. 

4.1.11. To take disciplinary and / or legal action against councillors, officials and agents who 
do not execute Council policies and by-laws or act improperly in terms of such 
policies. 

4.1.12. To approve a list of attorneys that will act for Council in all legal matters relating to 
debt collection. 

4.1.13. To delegate the required authority to monitor and execute the customer care, credit 
control, debt collection and indigent support policy to the Executive Mayor and 
Mayoral Committee, City Manager and Service Provider (if required) respectively. 

4.1.14. To provide sufficient capacity in the Municipality's Department: Financial Services to 
execute customer care, credit control, debt collection and indigent support actions. 
Alternatively, if required as such, to appoint a Service Provider or debt collection 
agentto perform these actions. 

4.1.15. To assist the City Manager in the execution of his duties, if and when required. 


Customer Care, Credit Control, Debt Collection and Indigent Support Policy 


8 




4.1.16. To provide funds for the training of staff. 


4.2 Duties and functions of Executive Mayor and Mayoral Committee 

4.2.1 To ensure that Council's budget, cash flow and targets for debt collection are met 
and executed in terms of the policy and relevant by-laws. 

4.2.2 To monitor the performance of the City Manager in implementing this policy and by- 
laws. 

4.2.3 To review and evaluate the policy and by-laws in order to improve the efficiency of 
Council's customer care, credit control, debt collection and indigent support 
procedures, mechanisms and processes. 

4.2.4 To report to Council. 

4.3 Duties and functions of the City Manager 

4.3.1 To implement good customer care management systems. 

4.3.2 To implement council's Customer Care, Credit Control, Debt Collection and Indigent 
Support Policy. 

4.3.3 To install and maintain an appropriate accounting system. 

4.3.4 To provide credible billing to customers. 

4.3.5 To demand payment on due dates. 

4.3.6 To raise penalties / interest for defaults. 

4.3.7 To appropriate payments received. 

4.3.8 To collect outstanding debt through a debt collection management system. 

4.3.9 To provide different payment methods. 

4.3.10 To determine customer care, credit control, debt collection and indigent support 
measures. 


Customer Care, Credit Control, Debt Collection and Indigent Support Policy 


9 






4.3.11 To determine all relevant work procedures for, inter alia, public relations, 
arrangements, disconnections of services, summonses, attachments of assets, sales 
in execution, write-off of debts, sundry debtors and legal processes. 

4.3.12 To instruct attorneys to proceed with the legal process (i.e. attachment and sale in 
execution of assets, emolument attachment orders, etc.). 

4.3.13 To set performance targets for staff. 

4.3.14 To appoint staff to execute Council's policy and by-laws in accordance with Council's 
recruitment policy. 

4.3.15 To delegate certain functions to executive directors in charge of departments. 

4.3.16 To determine control procedures. 

4.3.17 To monitor contracts with Service Providers in connection with credit control and 
debt collection. 

4.3.18 To report to the Executive Mayor and Mayoral Committee. 

4.3.19 To adhere to the Code of Conduct for Officials. 

4.3.20 To confirm any payment of judgment amounts (or a delegated official) for matters 
instituted by the court of law. 

4.4. Duties and functions of communities, ratepayers and residents 

4.4.1. To fulfil certain responsibilities, as brought about by the privilege and or right to use 
and enjoy public facilities and municipal services. 

4.4.2. To pay service fees, rates on property and other taxes, levies and duties imposed by 
the Municipality on or before due date. 

4.4.3. To observe the mechanisms and processes of the Municipality in exercising their 
rights. 

4.4.4. To allow municipal officials reasonable access to their property to execute municipal 
functions. 

4.4.5. To comply with the by-laws and other legislation of the Municipality. 


Customer Care, Credit Control, Debt Collection and Indigent Support Policy 


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4.4.6. 


To refrain from tampering with municipal services and property. 


4.5 Duties and functions of councillors 

4.5.1. To hold regular ward meetings (Ward Councillors). 

4.5.2. To adhere to and convey council policies to residents and ratepayers. 

4.5.3. To adhere to the Code of Conduct for Councillors. 

5. PERFORMAIMCE EVALUATION (Annexure "A") 

5.1 The Municipality must establish a mechanism to set targets for debt collection, 
customer care and administrative performance, evaluate and take corrective actions 
on a regular basis to enhance credit control and debt collection. 

5.2 Revenue collection targets 

5.2.1 Council to create targets that include the reduction in present monthly increase in 
debt in line with performance agreements determined by Council. 

5.3 Customer service targets 

5.3.1 Council to create targets that would include: 

(a) Response time to customer queries; 

(b) Date of first account delivery to new customers; 

(c) Reconnection time lapse; and 

(d) Meter reading cycle. 

5.3.2 Above-mentioned to be reflected in Standard Operating Procedures of Council. 

5.4 Administrative performance 

5.4.1 Council to create targets that will include: 

(a) Cost efficiency of debt collection; 

(b) Query and appeal periods; and 

(c) Enforcement mechanism ratios. 


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6 . 


REPORTING 


6.1 The Chief Financial Officer shall report monthly to the City Manager in a suitable 
format to enable the City Manager to report to the Executive Mayor and Mayoral 
Committee as Supervisory Authority in terms of section 99 of the Systems Act, read 
with section 100(c). This report shall contain particulars on: 

6.1.1 Cash collection statistics, showing high-level debt recovery information (numbers of 
customers; enquires; arrangements; default arrangements; growth or reduction of 
arrear debt). Where possible, the statistics should ideally be divided into wards, 
business (commerce and industry), domestic, state, institutional and other such 
divisions; and 

6.1.2 Performance of all areas against targets agreed to in paragraph 5 of this policy 
document. 

6.2 If in the opinion of the Chief Financial Officer, Council will not achieve cash receipt 
revenue equivalent of the revenue projected in the annual budget as approved by 
Council, the Chief Financial Officer will report this with motivation to the City 
Manager who will, if he / she agrees with the Chief Financial Officer, within legislative 
prescripts, immediately move for a revision of the budget according to realistically 
realisable income levels. 

6.3 The Executive Mayor and Mayoral Committee as Supervisory Authority shall, at least 
at intervals of 3 months, report to Council as contemplated in section 99(c) of the 
Systems Act. 

7. CUSTOMER CARE POLICY 

7.1 Objective 

7.1.1 To focus on the client's need in a responsible and pro-active way, to enhance the 
payment for services and to create a positive and co-operative relationship between 
the persons responsible for the payment for services received and the Municipality, 
and where applicable, any service provider. 

7.2 Communication 

7.2.1 The Municipality will, within its financial and administrative capacity, conduct an 

annual process of compiling and communicating its budget, which will include targets 
for credit control. 


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7.2.2 Council's Customer Care, Credit Control, Debt Collection and Indigent Support Policy 
or relevant extracts thereof, will be available in English (Xhosa and Afrikaans on 
request) and will be made available by general publication and on specific request, 
and will also be available for perusal at Council's offices. 

7.2.3 Council will endeavour to distribute a regular newsletter, which will give prominence 
to customer care and debt issues, in a cost effective manner. 

7.2.4 Ward councillors will be required to hold regular ward meetings, at which customer 
care and debt collection issues will be given prominence. 

7.2.5 The press will be encouraged to give prominence to Council's Customer Care, Credit 
Control, Debt Collection and Indigent Support Policy, and will be invited to Council or 
Committee meetings where these are discussed. 

7.2.6 Council will endeavor to create partnerships with civil society organisations in 
promoting customer care, credit control, debt collection and indigent support issues. 

7.3 Metering 

7.3.1 The Municipality wilI endeavor, within practical and financial limits, to provide meters 
to every paying client for all consuming services. 

7.3.2 All meters will be read monthly, if at all possible. If meters are not read on a monthly 
basis, Council will estimate the consumption in terms of Council's operational 
procedures. 

7.3.3 Customers are entitled to request verification of meter readings and accuracy within 
reason, but may be held liable for the cost thereof. 

7.3.4 Customers may be informed of a meter replacement. 

7.3.5 If a service is metered but it cannot be read due to financial and human resource 
constraints or circumstances out of the control of the Municipality or its authorised 
agent, and the customer is charged for estimated consumption, the account 
following the reading of the metered consumption must articulate the difference 
between the actual consumption and the average consumption, and the resulting 
credit or debit adjustments. 


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7.4 Accounts and billing 

7.4.1 Customers on the billing system will receive an understandable and accurate bill from 
the Municipality, which bill will consolidate all service costs for that property. 

7.4.2 Accounts will be produced in accordance with the meter reading cycle and due dates 
will be linked to the statement date. 

7.4.3 Accounts will be rendered monthly in cycles of approximately 30 days at the address 
last recorded with the Municipality or its authorised agent. 

7.4.4 It is the customer's responsibility to ensure that postal address and other contact 
details are correct. 

7.4.5 It is the customer's responsibility to ensure timeous payment in the event of accounts 
not received. 

7.4.6 Settlement or due dates will be as indicated on the statement. 

7.4.7 Where an account is not settled in full, any lesser amount tendered and accepted 
shall not be deemed to be in full and final settlement of such an account. 

7.4.8 Where any payment made to the Municipality or its authorised representative by 
negotiable instrument is later dishonored by a bank, the municipality or its 
authorised agent: 

(a) May recover the average bank charges incurred relating to dishonoured 
negotiable instruments against the account of the customer; and 

(b) Shall regard such an event as a default on payment. 

7.4.9 The Municipality or its authorised agent must, if administratively possible, issue a 
duplicate account to a customer on request, at a cost determined by Council from 
time to time. 

7.4.10 The Municipality will no longer open water and electricity accounts for tenants as 
from 01 July 2016. All new water and electricity connections after 1 July 2016 shall 
be levied on the owner's accounts. The existing tenant accounts will thus be phased 
out as tenants are moving out. Deposits for water and electricity are paid by the 
owners, in the case where there are still tenant's accounts and owners do not apply 
for the water and electricity, the Municipality will have the discretion to raise a 
deposit and transfer all levies from the date of registration to the owners account. 


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7.4.11 The only exception to paragraph 7.4.10 will be in cases where a qualifying indigent 
tenant applies for a water and electricity connection in order to be registered as an 
indigent consumer. 

7.4.12 Adjustments made to a customer's account in favour of the customer, will be made 
for a maximum of three years preceding the date on which the error was detected. 

7.4.13 Adjustments made to a customer's account, in favour of the municipality, will be 
made for the three years preceding the date on which the error was detected. 

7.4.14 The owner will stay responsible for the payment of the outstanding accounts for 
electricity and water supply notwithstanding any agreement with an occupier or 
tenant of a property. 

7.5 Payment facilities and methods 

7.5.1 The Municipality will operate and maintain suitable payment facilities (internet 
payment facilities included), and which facilities will be accessible to all users. 

7.5.2 The Municipality will at its discretion allocate a payment between service debts and 
a debtor, who has overdue debt, may not specify that the payment is for a specific 
portion of the account. 

7.5.3 The Municipality may in terms of section 103 of the Systems Act, with the consent of 
a customer, approach an employer to secure a debit or stop order arrangement. 

7.5.4 The customer will acknowledge, in the customer's agreement that the use of 
customer agents in the transmission of payments to the municipality is at the risk of 
the customer - also for the transfer time of the payment. 

7.6 Incentives for prompt payment and final settlements 

7.6.1 Council may, to encourage prompt payment and/or to reward regular payers, 
consider from time to time incentives for the prompt payment of accounts or 
payment by debit or stop order. 

7.6.2 Such incentive schemes, if introduced, will be reflected in annual budgets as 
additional expenditure. 


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7.6.3 The Chief Financial Officer may accept full and final settlement offers arising from a 
dispute, where the last 12 months surcharges and interest may be waived after full 
payment of the capital amount has been made upon resolving the dispute. 

7.6.4 The Chief Financial Officer may reverse interest and surcharges levied for a late 
payment, where a consumer was promptly paying an account for the last 12 months 
prior to the late payment. 

7.7 Enquiries, appeals and service complaints 

7.7.1 Within its administration and financial ability the Municipality will establish: 

(a) A central complaints / feedback office; 

(b) A centralised complaints database to enhance co-ordination of complaints, 
their speedy resolution and effective communication with customers; 

(c) Appropriate training for officials dealing with the public to enhance 
communications and service delivery; and 

(d) A communication mechanism to give council feedback on service, debt and 
other issues of concern. 

7.7.2 If a customer is convinced that his or her account is inaccurate, he or she can lodge a 
query with the Municipality for investigation of this account, and where necessary 
the relevant alterations. 

7.7.3 In the interim the debtor must pay the average of the last three months accounts 
where such history of the account is available. Where no such history is available, 
the debtor is to pay an estimate provided by the Municipality before payment due 
date until the matter is resolved. 

7.7.4 The relevant department will investigate and inform the debtor within 60 days or as 
determined by the City Manager from time to time. 

7.7.5 Failure to make the payment(s) mentioned in paragraph 7.7.3 above, will result in the 
Municipality collecting the balance outstanding on the customers' account using the 
normal credit control procedures as detailed in paragraph 8 here-under. 

7.7.6 A customer or its authorised agent may appeal against the findings of the 
Municipality in terms of paragraph 7.7.2. 


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7.7.7 An appeal and request in terms of paragraph 7.7.6 must be made and lodged with 

the municipality within 21 (twenty-one) days after the customer became aware of 

the finding referred to in paragraph 7.7.4 and must: 

(a) Set out the reasons for the appeal; and 

(b) Be accompanied by any fee determined for the testing of a measuring device, 
if applicable. 

7.8 Customer assistance programmes 
7.8.1 Water Leakages 

(a) If the leakage is on the customer's side of the meter, the customer will be 
responsible for the payment of all water supplied to the property. 

(b) Where the consumer can provide an invoice and proof of payment from the 
service provider (e.g. Plumber) that repaired the leakage, the municipality may 
at its sole discretion provide relief based on a calculation to be done on the 
corresponding months of the previous' years consumption to determine the 
water lost due to the leak. 

(c) A consumers to provide a sworn affidavits with proof of purchase of material 
used to repair a leakage. A consumer (indigents included) whom has repaired 
the leak themselves must provide Council with a sworn affidavit that the 
consumer fixed the leak themselves. 

(d) The calculated consumption will be deducted from the higher leakage amount, 
where after the balance will be payable by the consumer. 

(e) Should the leakage be for more than a year or two years, then the consumption 
will be monitored for 3 months after the leakage has been repaired, where 
after the account will be rectified as per above sub-paragraph (d). 

(f) Where there is an abnormal water consumption that cannot be substantiated 
after the meter test results are obtained, the Executive Manager: Infrastructure 
or his delegated official must furnish the Chief Financial Officer with a 
recommendation in terms of reducing the consumption in line with the 
consumer's average consumption for the previous 12 months. 

(g) The customer has the responsibility to control and monitor his/her water 
consumption, including where control devices are in use flow. 


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7.8.2 Property rate rebates 


(a) Properties used exclusively for residential purposes may qualify for a rebated 
rate determined annually by Council. 

(b) A rate rebate may be granted according to certain qualifying criteria to social 
pensioners or the receiver of a State disability grant and / or any category of 
customer, as determined by Council from time to time. 

(c) These rebates will be determined as per Council's Property Rates Policy. 

7.8.3 Arrangements for default settlements (Annexure "B") 

(a) Customers with electricity and water arrears shall be converted to pre-paid 
meters. When such meters are installed the cost thereof and the arrears total 
will be paid off either by: 

(i) Adding the debt to the arrears bill and repaying it over the agreed period; 
or 

(ii) Adding the debt as a surcharge to the prepaid electricity or water cost, 
and repaying it with each purchase of electricity and water until the debt 
is liquidated (Refer to paragraph 8.9 of this policy for percentages). 

(b) In the case of households qualifying for indigent support, the conversion costs 
to a prepayment meter will be funded through that portion of the equitable 
share contribution to the Municipality made from the national government's 
fiscus and as provided for in the budget. 

(c) Council reserves the right to raise the deposit requirement of debtors who 
seek arrangements. 

7.8.4 Rates by instalments 

(a) Payment arrangements are determined as per Council's Property Rates Policy. 

7.8.5 Customer categories 

(a) Customers will be categorised according to specific classifications based on 
inter alia the type of entity and applicable tariffs and risk levels. Processes for 


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credit control, debt collection and customer care may differ from category to 
category, as deemed appropriate from time to time by the City Manager. 

7.9 Priority customer management 

(a) Certain customers will be classified as priority customers based on criteria 
determined by the City Manager from time to time, such as the number of 
properties owned or volume of consumption. 

(b) A Priority Customer Liaison Officer or person nominated by the City Manager 
will be responsible for the ongoing management of the customers so classified 
and will perform tasks such as the review of monthly accounts to ensure 
accuracy, the monitoring of prompt settlement of accounts and response to 
queries. 

8 CREDIT CONTROL POLICY 

8.1 Objective 

8.1.1 To implement procedures which ensure the collection of debt, meeting of service 
targets and the prevention of escalation in arrear debt. 

8.1.2 To facilitate financial assistance and basic services for the community's poor and 
provide incentives for prompt payment as well as ensuring limited risk levels by 
means of effective management tools. 

8.2 Service application and agreements (Annexure "F") 

8.2.1 All customers of services will be required to sign an agreement governing the supply 

and cost of municipal services (Annexure "F" or similar agreement). 

8.2.2 Prior to signing these agreements, customers will be entitled to receive the policy 
document of the Council on request at a cost determined by Council. 

8.2.3 On the signing of the agreement, customers will receive a copy of the agreement for 
their records. 

8.2.4 Customers are responsible for costs of collection on a scale as determined between 
attorney and client, and interest in the event of delayed and / or non-payment. The 
interest will be charged at the prevailing prime interest rate. 


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8.2.5 Existing customers of services will be required to sign new agreements as determined 
by the City Manager from time to time. This will particularly be in the case of 
defaulters. 

8.3 Right of access to premises 

8.3.1 The owner and or occupier of property is to allow an authorised representative of 
the Municipality access at all reasonable hours to the property in order to read, 
inspect, install or repair any meter or service connection for reticulation, or to 
disconnect, stop or restrict, or reconnect, the provision of any service. 

8.3.2 The owner is responsible for the cost of relocating a meter if satisfactory access is not 
possible. 

8.3.3 If a person fails to comply with the Municipality or its authorised representative, the 
Municipality may: 

(a) By written notice require such person to restore access at his/her own 
expense within a specified period; 

(b) If it is the opinion that the situation is a matter of urgency, without prior notice 
access the premises of such person in order to disconnect or repair any such 
meter or service connection provided that damage to the property of such 
person is minimised, minimum force is used and after the Municipality has 
gained such access that the premises of such person is secured; and 

(c) The cost of gaining such access shall be for the account of the owner of the 
premises if the reason for the urgency is that of the owner or occupier of the 
premises. 

8.4 Enforcement mechanisms 

8.4.1 Interest will be raised as a charge on all accounts not paid by the due date in 
accordance with applicable legislation. The levying of interest does not prevent credit 
control action to occur. 

8.4.2 The above interest will not be raised on government accounts with arrears to avoid 
fruitless and wasteful expenditure in terms of the PFMA. 


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8.4.3 The municipality however reserves the right to disconnect and or restrict the water 
and electricity meters of government departments in the event of non-payment or 
late payment of their respective active. 

8.4.4 Provided that the Municipality has served written notice on both the owners and 
occupiers (if applicable) of the property of at least seven (7) days, the Municipality 
shall have the right to restrict or discontinue the supply of services or to implement 
any other debt collection action necessary due to late or non-payment of accounts, 
relating to any consumer, owner or property. 

8.5 Theft and fraud 

8.5.1 Any person (natural or juristic) found to be illegally connected or reconnected to 
municipal services, tampering with meters, the reticulation network or any other 
supply equipment or committing any unauthorised act associated with the supply of 
municipal services, as well as theft of and damage to Council property, may be 
prosecuted and / or is liable for penalties as determined by Council from time to time. 

8.5.2 Any member of the local community that supply information with regard to any of 
the illegal actions as set out in paragraph 8.5.1, and the information when verified 
found to be true, will upon authorisation by the City Manager be rewarded as 
determined by Council from time to time. The name of the informant and the 
information supplied will at all times be kept confidentially so as to protect the 
informant against any retaliatory action. 

8.5.3 Upon reasonable notice to both the owner as well as the occupier of the premises, 
Council will immediately terminate the supply of services to a customer should such 
conduct as outlined above, be detected. 

8.5.4 The total bill owing, including penalties, assessment of unauthorised consumption 
and discontinuation and reconnection fees, and increased deposits as determined by 
Council, if applicable, will be due and payable before any reconnection can be 
sanctioned. 

8.5.5 Council will maintain monitoring systems in order to identify customers who are 
undertaking such illegal actions. 

8.5.6 No person may in any manner tamper or interfere with any meter or metering 
equipment or service connection or service protective device or supply mains or any 
other equipment of the municipality. 


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8.5.7 Where prima facie evidence exists of a consumer and/or any person having 
contravened paragraph 8.5.6, the municipality shall have the right to disconnect the 
supply of electricity upon reasonable notice to both the owner as well as the occupier 
of the premises. The person shall be liable for all fees and charges levied by the 
municipality for such disconnection and subsequent reconnection. 

8.5.8 Where a consumer and / or any person has contravened strbsection 18(d) of the 
Customer Care, Credit Control, Debt Collection and Indigent Support By-Law and such 
contravention has resulted in the meter recording less than the true consumption, 
the municipality shall have the right to recover from the consumer the cost of the 
estimated consumption, that was lost for three preceding years, based on the 
prevailing tariff in the year that the unauthorized consumption was identified. 

8.5.9 Where a consumers meter does not switch off when all the units are consumed, then 
the municipality shall have the right to recover from the consumer the estimated 
consumption that was lost for three preceding years, based on the prevailing tariff in 
the year the unauthorized consumption was identified. 

8.5.10 Council reserves the right to lay criminal charges and/or to take any other legal 
action against both vandals and thieves, including the recovery of costs of repairing / 
replacing of damaged devices. 

8.5.11 Any person failing to provide information or providing false information to the 
municipality may face immediate disconnection and / or legal action. 

8.6 Customer screening and securities 

8.6.1 All applicants for municipal services may be checked for credit-worthiness including 
checking information from banks, credit bureaus, other local authorities, trade 
creditors and employers. 

8.6.2 Deposits either in cash or any other security acceptable to the Municipality will be 
required, and may vary according to the risk as determined by the Municipality. A 
minimum deposit of the equivalent of two months average consumption will be 
required. 

8.6.3 Deposits can be increased by the municipality at any time and at the sole discretion 
of the Municipality to a maximum of three months average consumption. 

8.6.4 Deposits can vary according to the credit-worthiness or legal category of the 
applicant. 


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8.6.5 The Municipality will not pay any interest on deposits. 

8.6.6 On the termination of the agreementthe amount of the deposit, less any outstanding 
amount due to the Municipality, will be refunded to the consumer. 

8.7 Persons and business who tender to the Municipality 

8.7.1 The Supply Chain Management Policy and Tender Conditions of the Municipalities 
will include the following: 

(a) When inviting tenders for the provision of services or delivery of goods, 
potential contractors may submit tenders subject to a condition that 
consideration and evaluation thereof will necessitate that the tenderer obtain 
from the Municipality a certificate stating that all relevant municipal accounts 
owing by the tenderer and / or its directors, owners or partners have been paid 
or that suitable arrangements (which include the right to set off in the event of 
non-compliance) have been made for payment of any arrears; 

(b) No tender will be allocated to a person / contractor until a suitable 
arrangement for the repayment of arrears, has been made. No further debt 
may accrue during contract period; and 

(c) A condition allowing the Municipality to deduct any moneys owing to the 
Municipality from contract payments. 

8.8 Cost of collection 

8.8.1 All costs of legal processes, including interest, penalties, service discontinuation costs 
and legal costs on attorney and client scale associated with customer care or credit 
control, wherever applicable, are for the account of the debtor and should reflect at 
least the cost of the particular action. 

8.9 The pre-payment meter system 

8.9.1 The Municipality will use its pre-payment system to: 

(a) Link the provision of electricity and water by the Municipality to a "pre- 
payment" system comprising, first, a pre-payment of electricity kWh and water 
kiloliters; and 

(b) A payment in respect of arrears comprising a "package" of accrued municipal 
taxes and other municipal levies, tariffs and duties in respect of services such 
as water, refuse removal, sanitation and sewage. 


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8.9.2 A customer with arrears incurred since the January 2013 billing run who opts for the 
pre-payment system, will be required to repay all arrears in full before any amount is 
allocated to an electricity pre-payment, or, if the amount outstanding is large and / or 
the customer's ability to pay is limited (because of low income, cash flow problems 
etc.), to pay the arrears by allocating a percentage of all monies offered for purchases 
towards the arrears, as set out below, before any electricity credit is given: 


(a) 

30 days and older 

= 50%; 

(b) 

60 days and older 

= 60%; 

(c) 

90 days and older 

= 70%; and 

(d) 

120 days and older 

= 80%. 


8.9.3 In cases where the 80% blocking methodology is not adequate to decrease the 
outstanding debt, the pre-paid metering system shall on reasonable notice to both 
the owner and the occupier be blocked at 100% or the electricity supply shall be 
disconnected. 

8.9.4 When the owner, tenant or occupier is using the property in his business to earn an 
income, a basic electricity charge will be levied daily. The owner will be responsible 
for the daily electricity basic charge, even after a tenant or occupier has vacated the 
property. 

9. DEBT COLLECTION POLICY 

9.1 Objective 

9.1.1 To provide procedures and mechanisms to collect all the monies due and payable to 
Council arising out of the supply of services and annual levies, in order to ensure 
financial sustainability and delivery of municipal services in the interest of the 
community. 

9.2 Personal contact 

9.2.1 Telephonic contact, agents calling on clients: 

(a) Council will endeavor, within the constraints of affordability, to make personal 
or telephonic contact with all arrear debtors to encourage their payment, and 
to inform them of their arrears state, their rights (if any) to conclude 
arrangements or to indigent support, other related matters and will provide 
information on how and where to access such arrangements or subsidies; and 


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(b) Such contact is not a right for debtors to enjoy and disconnection of services 
and other collection proceedings may continue, in the absence of such contact 
for whatever reason, provided that reasonable notice has been given to both 
the occupier and the owner of the concerned premises. 

9.3 Interruption of service 

9.3.1 Customers who are in arrears with their municipal account and who have not made 
arrangements with the Council will have their supply of electricity suspended or 
disconnected, provided that reasonable notice has been given to both the occupier 
and the owner of the concerned premises. 

9.3.2 The disconnection of electricity services may happen when the municipal account is 
one (1) day overdue, provided that reasonable notice has been given to both the 
occupier and the owner of the concerned premises, where there are separate 
accounts registered on the system. 

9.3.3 A fourteen (14) day disconnection notice will be issued for the first default. If a 
consumer defaults again in the following month, then a seven (7) day disconnection 
notice will apply. 

9.3.4 Provided that Council has demanded payment of arrear rates and other municipal 
charges, Council reserves the right to deny or restrict the sale of electricity to 
customers who are in arrears with their rates or other municipal charges. 

9.3.5 Upon the liquidation of arrears, or the conclusion of acceptable arrangements for 
term payment, the electricity service will be reconnected and / pre-paid electricity 
sold as soon as conveniently possible. 

9.3.6 The cost of the restriction ordisconnection, and the reconnection, will be determined 
by tariffs approved by Council, and will be payable by the customer. 

9.3.7 The deposit of any defaulter may be adjusted to bring into line with relevant policies. 

9.4 Legal process / Use of attorneys / Use of credit bureaus 

9.4.1 Council may, when a debtor is in arrears, commence legal process against that 

debtor, which process could involve final demands, summonses, court trials, 
judgements, garnishee orders and / or sales in execution of property. 


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9.4.2 Council will exercise strict control over this process, to ensure accuracy and legality 
within it, and will require regular reports on progress from outside parties, be they 
attorneys or any other collection agents appointed by Council. 

9.4.3 Council will establish procedures and codes of conduct with these outside parties. 

9.4.4 Garnishee orders, in the case of employed debtors, are preferred to sales in 
execution, but both are part of Council's system of debt collection procedures. 

9.4.5 All steps in the customer care and credit control procedure will be recorded for 
Council's records and for the information of the debtor. 

9.4.6 All recoverable costs of this process will be for the account of the debtor. 

9.4.7 Individual debtor accounts are protected and are not the subject of public 
information. However Council may release debtor information to credit bureaus. 
This release will be in writing or by electronic means. 

9.4.8 Council may consider the cost effectiveness of the legal process, and will receive 
reports on relevant matters, including cost effectiveness. 

9.4.9 Council may consider the use of agents as service providers and innovative debt 
collection methods and products. Cost effectiveness, the willingness of agents to 
work under appropriate codes of conduct and the success of such agents and 
products will be part of the agreement Council might conclude with such agents or 
service providers; and will be closely monitored by Council. 

9.4.10 Customers will be informed of the powers and duties of such agents or service 
providers and their responsibilities including their responsibility to observe agreed 
codes of conduct. 

9.4.11 Any agreement concluded with an agent, service provider or product vendor shall 
include a clause whereby breaches of the code of conduct by the agent or vendor will 
constitute a breach of the contract. 

9.5 Rates clearance 

9.5.1 On the sale of any property in the municipal jurisdiction, Council will withhold the 
transfer until all rates and service charges owed by the owner seeking transfer are 
paid by withholding a rates clearance certificate as contemplated in section 118 of 
the Act. 


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9.5.2 The amount for the period prior to section 118 of the Municipal Systems Act, will be 
handed over for legal collection where the new and previous owner could be held 
liable for payment of these amounts. 

9.6 Abandonment of claims 

9.6.1 The City Manager must ensure that all avenues are utilised to collect the 
municipality's debt. 

9.6.2 There are some circumstances that allow for the valid termination of debt collection 
procedures as contemplated in section 109(2) of the Act, such as: 

(a) The insolvency of the debtor, whose estate has insufficient funds; 

(b) A balance being too small to recover, for economic reasons, considering the 
cost of recovery; and 

(c) Where Council deems that a customer or groups of customers are unable to 
pay for services rendered. 

9.6.3 The Municipality will maintain audit trials in such an instance, and document the 
reasons for the abandonment of the action or claim in respect of the debt. 

9.6.4 Procedures for the abandonment of claims are determined in the Writing-Off of 
Irrecoverable Debt Policy. 

10. MUNICIPAL EMPLOYEES AND COUNCILLOR DEBT 

10.1 Staff arrears will be dealt with in accordance with Schedule 2 of the Systems Act, and 
in terms of any procedures, method or actions referred to in this Policy. 
Notwithstanding any other procedure, method or action that may be taken in terms 
of this Policy, the Municipality shall deduct any outstanding amount from such staff 
members' salary after this three (3) month period. 

10.2 In accordance with Schedule 1, item 12A of the Systems Act, a Councillor of the 
Municipality may not be more than 3 (three) months in arrears for municipal service 
fees, surcharges on fees, rates or any other municipal taxes, levies and duties levied 
by the Municipality. Notwithstanding any other procedure, method or action that 
may be taken in terms of this Policy, the Municipality shall deduct any outstanding 
amount from such Councillor's remuneration after this three (3) month period. 


Customer Care, Credit Control, Debt Collection and Indigent Support Policy 


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11. INDIGENT AND FINANCIAL SUPPORT POLICY 

11.1 The purpose of the indigent and financial support is to provide funding for a basic 
level of services to qualifying households with a total gross income level which is 
below a determined amount, and according to further specified criteria as 
determined by Council from time to time. 

11.2 Council will supply an indigent and financial assistance subsidy, in line with national 
government regulations and guidelines to assist poor households in the Drakenstein 
municipal area. The subsidy will be provided by means of a rebated basket of basic 
municipal services. 

11.3 Qualifying criteria 

11.3.1 The indigent and financial assistance subsidy is available only to domestic 
households where: 

(a) The household meets the definition of a household and household income as 

defined in paragraphs 1.1.16 and 1.1.17 of this policy. Th e tot al incom e of 
own e rs/municipa l t e nants and a ll occupants ov e r th e ag e of 18 y e ars r e siding 

on th e prop e rty is e qua l to or le ss than th e el igib le incom e thr e sho l d as 

d e t e rmin e d by Counci l on an annua l basis. 

(b) The household is headed by children who meet the definition stipulated under 
paragraph 1.1.4 of this policy. 

(c) Account holders own one property. 

(d) Account holders are deceased and the occupiers of the property qualify in 
terms of the eligible income threshold as determined by Council on an annual 
basis. 

(e) Tenants of municipal rental property who meet the criteria of a household as 
per paragraph 11.3.1(a). 

(f) Pensioners who has usufruct of a dwelling belonging to a non-qualifying owner 
(e.g. children or relative). 

(g) Qualifying account holders do not occupy their properties for various reasons, 
leaving qualifying persons over the age of 18 years to reside on the property. 


Customer Care, Credit Control, Debt Collection and Indigent Support Policy 


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11.4 


Subsidy requirement 


(a) Only qualifying indigent consum e rs' households and households eligible for 
financial assistance who have up to a 30 Amp electricity connection will have 
their basic electricity charges subsidised as part of the indigent support grant. 

(b) Qualifying indigent households and households eligible for financial 
assistance with an electricity connection greater than 30 Amp, will still qualify 
for the lOOkWh free electricity but will not be subsidised for their basic 
electricity charges. 

(c) Qualifying indigent consumers that exceed 20kl of water per month and are in 
arrears may have an automated flow restriction apparatus fitted to their water 
supply. 

11.5 Funding 

11.5.1 The source of funding of the indigent support is that portion of the equitable share 
contribution to the Municipality made from the national government's fiscus and as 
provided for in the budget. As such, the subsidy can only be credited to qualifying 
custom e rs' households' accounts until the amount received by the Municipalityfrom 
National Government for this purpose has been exhausted, whereupon no further 
credits will be made, or the level of the credits reduced, until further national funds 
are received. 

11.6 Allocation of subsidised services 

11.6.1 Subsidised services for the 2019/2020 financial year will be as follows: 

(a) Property Rates, Refuse Removal and Sewerage 

(i) One refuse removal once per week per household; 

(ii) The minimum sewerage charge equivalent to 1 toilet per household and 
a basic fee equivalent to a maximum stand size of 550m 2 ; and 

(iii) Property rates to the extent that is determined in the Property Rates 
Policy of Council. From the 2019/2020 financial year, property rates 
equivalent to a maximum property value of R500,000 will be subsidized. 


Customer Care, Credit Control, Debt Collection and Indigent Support Policy 


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(b) Water and Electricity 


(i) Water (Kiloliters per month as determined by Council from time to time). 
Consumption exceeding the kiloliters determined by Council will be 
payable by the customer. From the 2019/2020 financial year a maximum 
of 6 kiloliters free water per household per month will be subsidized; 

(ii) Electricity ( up to 100 kWh per month for Category A & B households and 
50 kWh per month for CategoryC&D households) . Consumption 
exceeding 100 kWh will be payable by the indigent consumer; and 

(iii) A household consuming more than 400 kWh units of electricity per 
month will still qualify to purchase electricity at the lifeline tariff but for 
the consumption above 400 kWh units of electricity per month will pay 
the normal electricity tariff. 

(c) Municipal Rentals 

(i) A rebate equivalent to the municipal rental amount for all qualifying 
indigent consumers to the maximum amount of the total basket of basic 
services provided to domestic indigent consumers will be granted. 

(d) Free Bulk Services 


(i) Free bulk services shall be the provision of services (water stand pipes, 
high mast lighting, toilets and refuse removal (skip bins) to informal 
settlements. 

(ii) The cost of the provision of free bulk services is recovered from the 
Equitable Share allocation. 

(e) BuildinR Plans 

(i) 50% rebate of building plan fees as per the approved tariff structure of 

the Municipality. 

(f) Municipal Fire Brigade Fees 

(i) 50% rebate on municipal fire brigade fees as per the approved tariff 

structure of the Municipality 


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11.7 Applications and documents required 


11.7.1 The account holder must apply in person and must present the following documents 

upon application: 

(a) The latest municipal account in his/her possession; 

(b) The account holder's identity document; 

(c) An application form indicating the names and identity numbers of the 
occupants who are responsible for the payment of the municipal services 
rendered to the residents at the property; 

(d) Documentary proof of income and marital status (e.g. letter from an employer, 
salary advice, pension card, UIF card, etc.) must be presented in orderto qualify 
for indigent and financial support assistance; 

(e) In addition, applicants will be required to sign and submit a sworn affidavit to 
the effect that all information supplied is true and that all income from formal 
and/or informal sources has been declared. Special note should be taken that 
any person who supplies false information will be disqualified from further 
participation in the indigent support scheme. He/she will also be liable for the 
immediate repayment of all indigent support received and the institution of 
criminal proceedings, as Council may deem fit; 

(f) Approved pensioner indigent applications (disabled persons and child headed 
families included) will be valid fora period ofthreefinancial years, startingfrom 
2018/2019, and will be renewed in the financial year 2021/2022; 

(g) If the application is approved, the indigent support will only be valid until the 
end of the financial year for which the indigent application has been evaluated 
with no guarantee of renewal, as it is funded by a grant from National 
Government to the Municipality. The onus is on account holders to re-apply 
for relief each year, failing which the assistance will cease automatically; and 

(h) Council reserves the right to send officials to premises/households receiving 
relief for the purpose of conducting an on-site audit of the details supplied. 


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11.7.2 General indigent subsidy conditions 


(a) If a consumer's consumption or use of the municipal service is less than the 
subsidized service, the unused portion may not be accrued by the customer 
and will not entitle the customer to cash or a rebate in respect of the unused 
portion. 

(b) If a customer's consumption or use of a municipal service is in excess of the 
subsidised service, the customer will be obliged to pay for such excess 
consumption at the applicable rates. 

(c) All consumers who qualify for an equitable share subsidy will be placed on 
restricted service levels in order to limit further escalation of debt. 

(d) Where applicable, these consumers may be exonerated from a portion of their 
arrear debt. 

(e) Where a qualifying customer's account is paid in full at the date of application, 
or regularly maintains a paid up account after receiving the subsidy, the 
restriction on service levels will be waived. 

(f) An indigent customer must immediately request de-registration by the 
municipality or its authorised agent if his / her circumstances have changed to 
the extent that he / she no longer meets the criteria. 

(g) An indigent customer may at any time request de-registration. 

(h) A list of indigent customers will be maintained and may be made available to 
the general public. 

(i) No indigent application will be approved if there is a rates clearance application 
on the system on date of indigent application. Such applications will only be 
approved in cases where the rates clearance is in terms of section 45(1) of the 
Deeds Registries Act, No47 of 1937. 

(j) Council reserves the right to send officials to premises / households receiving 
relief for the purpose of conducting an on-site audit of the details supplied. 


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11.8 Additional subsidy categories 


(a) Council may provide, free of charge to a customer, certain basic levels of water 
and electricity, as determined from time to time. 

(b) Council may provide grants in lieu of rates to certain categories of owners of 
domestic properties to alleviate poverty. 

(c) Rebates may be granted to sporting bodies for consumption but tariffs would 
at least cover the cost of the service. 

(d) Rebates may be granted to large customers to attract business to Drakenstein 
that would benefit the community of Drakenstein. 

Support to r e tir e d and disab le d p e rsons who just fa ll outsid e th e indig e nt hous e ho l d 

brack e t r e f e rr e d to in paragraph 1 and 2 abov e. 


(e)— Counci l may consid e r supporting r e tir e d and disab le d p e rsons hous e ho l ds who 

just fa ll s outsid e th e indig e nt hous e ho l d brack e t of two tim e s th e month l y 

gov e rnm e nt soc i a l grants pa i d to o l d ag e p e nsion e rs or d i sab le d p e rsons. 


(k)— Th e s e cas e s wi ll b e s ee n as sp e cia l m e rit non - indig e nt hous e ho l d cas e s to b e 

consid e r e d on an ad hoc basis by Counci l . 


(e)— Th e s e cas e s wi ll hav e to comp l y with th e abov e- m e ntion e d app l ication crit e ria 

as w ell as thos e l ist e d in th e Prop e rty Rat e s Po l icy b e for e it wi ll b e consid e r e d 

by th e Ex e cutiv e Mayor and Mayora l Committ ee of Counci l . 


(d)— Counci l may requir e a r e port from a w el far e practition e r as part of th e 

app l ication crit e ria b e for e consid e ring th e app l ication and possib le financia l 

support. 

11.10 Qualifying Income Thresholds 

11.10.1 For the 2019/2020 financial year the total monthly income and corresponding 
financial support for the different category households is determined as follows:- 

(a) Category A : R 0 to R4,450 per month -100% of indigent support; 

(b) Category B : R4,451 to R4,950 per month - 80% of indigent support; 

(c) Category C : R4,951 to R6,200 per month - 50% of indigent support; and 


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(d) Category D : 


R6,201 to R6,500 per month - 20% of indigent support. 


11.10.2 The Municipality retains the right to refuse the financial support if the details supplied 
in the application form were incomplete, incorrect or false. 

11.10.3 Th e Chi e f Financia l Offic e r may app l y his/h e r mind to e xc e ptiona l cas e s not contain e d 

a bov e . The City Manager, in consultation with the Chief Financial Officer, may in 

extra ordinary circumstances migrate a household from Category D to C, C to B or 

B to A. 


11.10.4 In the case of the underutilisation of the equitable share, the Executive Mayor, in 

consultation with the City Manager, may adjust the determined income thresholds 

in paragraph 11.10.1 above upwards. 


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ANNEXURE A: REVENUE COLLECTION TARGETS 


1. Computerised credit control and debt collection management system 

1.1 It is Council's intention to collect all revenue due to Council from customers who can 
afford to pay. 

1.2 For this purpose it is acknowledged that the Municipality is in need of a computerised 
credit control and debt collection management system. 

1.3 This system will be procured through the supply chain management process or 
alternatively the City Manager may obtain the services of an external service provider 
to perform this function. 

2. Payment level on current accounts 

2.1 The total outstanding debtors as at 28 February 2019 amounted to R280,772,783 of 
which R112,147,143 represented current debtors February 2019 billing run levies) 
and R168,625,640 represented arrear debtors. 

2.2 It is acknowledged that the current payment level of all customers for the first eight 
months of the 2018/2019 financial year was 103.3%. 

2.3 It is Council's intention to increase the payment level by 0.2% every 3 months until a 
100% payment level of all customers who can afford to pay has been reached. 

3. Recovery of arrears (Accumulated before the January 2018 billing run) 

3.1 The Municipal Council reviewed on 31 May 2018 the Policy on the Writing-Off of 
Irrecoverable Debt with the following two incentives to their customer base to assist 
them to get out of their spiral of debt provided that all levies since the January 2018 
billing run is paid up to date: 

(a) Council will write-off 50% of the outstanding debt before the January2018 
billing run if a customer (all customers except for government or school debtors 
who are treated on an ad hoc basis) will pay the other 50% of the outstanding 
debt; and 

(b) Council will write-off any outstanding debt before the January 2018 billing run 
that a household customer accrued that the household customer cannot afford 
to pay back over the next three years after his arrear and current payments has 
been capped at 20% of the household income. 

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35 




3.2 To collect with the assistance of a computerised credit control and debt collection 
management system or an appointed service provider, all recoverable arrears over a 
maximum period of three years by using the incentives in the Writing-Off of 
Irrecoverable Debt Policy. Irrecoverable arrears (estimated between 40% and 60% of 
the arrear debtors' book) will have to be written-off. 

3.3 To achieve this goal the level of recovery of recoverable arrears (writing-off 
incentives included) should be: 


(a) 

Within 6 months = 

20%; 

(b) 

7 to 12 months = 

20%; 

(c) 

13 to 18 months = 

20%; 

(d) 

19 to 24 months = 

20%; and 

(e) 

25 to 36 months = 

20%. 


3.4 The Senior Manager: Revenue and Expenditure or delegated person can in extreme 
cases accept a longer period of repayment based on the financial position of the 
customer and other circumstances if the incentives in the Writing-Off of 
Irrecoverable Debt Policy do not assist the customer to get out of their spiral of debt 
within three years. 

4. Recovery of arrears 

4.1 It is acknowledged that not all customers might have been in arrears before the 
January2018 billing run. Customers who accumulated arrears as from the 
January 2018 billing run will be recovered over a maximum period of one year. 

4.2 To achieve this goal the level of recovery should be: 


(a) 

Within 6 months 

= 

50%; 

(b) 

7 to 9 months 

= 

30%; and 

(c) 

10 to 12 months 

= 

20%. 


5. Customer service targets 


(a) 

Response time to 
customer queries: 

Initial response within 5 working days 

(b) 

Date of first account 

delivery to new 

customers: 

By second billing cycle after date of application 
or occupation whichever is the latest 


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(C) 

Reconnection time: 

Within 24 hours after appropriate payment / 
arrangement 

(d) 

Electricity meter reading 
cycle: 

90% of meters being read on a monthly basis 

with a maximum of 3 consecutive months 

estimated 

(e) 

Water meter reading 
cycle: 

80% of meters being read on a monthly basis 

with a maximum of 3 consecutive months 

estimated 


6. Administrative performance targets 

6.1 Cost Efficiency of Debt Collection : 

6.1.1 Cost efficiency of debt collection: 

(a) Cost of collection not to exceed the capital debt amount; 

(b) All reasonable steps to be taken to limit cost to Council or the customer; 

(c) Cost of collection is to be recovered from the defaulting customers; and 

(d) Total cost of collection to be recovered by means of applicable credit control 
tariffs. 

6.2 Queryand appeal periods : 

6.2.1 Sixty (60) working days to resolve queries and appeals through Council committees, 
the Executive Mayor and Mayoral Committee and Council. 


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ANNEXURE B: ARRANGEMENTS 


1. ARRANGEMENTS 

1.1 If a customer cannot pay his / her account with the Municipality then the Municipality 
may enter into an extended term of payment not exceeding 36 months The customer 
must: 

1.1.1 Sign an acknowledgement of debt; 

1.1.2 Sign consent to judgement; 

1.1.3 Provide a garnishee order / emolument order/stop order (if he or she is in 
employment); 

1.1.4 Acknowledge that interest will be charged at the prescribed rate; 

1.1.5 Pay the current portion of the account in cash; 

1.1.6 Sign an acknowledgement that, if the arrangements being negotiated are later 
defaulted on, that no further arrangements will be possible and that disconnection of 
water and electricity will follow immediately, as will legal proceedings; and 

1.1.7 Acknowledge liability of all costs incurred. 

1.2 Consumer to agree to signing an electronic Acknowledgement of Debt form, which 
stipulates all of the above and acknowledges the arrangements made. 

2. THE FOLLOWING ACCEPTABLE ARRANGEMENTS CAN BE ENTERED INTO WITH: 

2.1 Domestic consumers 

2.1.1 The prescripts of the Writing-Off of Irrecoverable Debt Policy will be used to determine 
the acceptable arrangements on arrears. 

2.1.1 The customer may have three accounts in making such acceptable arrangements. A 
current account that must be paid up to date on a monthly basis, a suspended account 
that will carry the monthly arrangements instalments to be paid over a maximum of 
36 months and a suspended account that will carry the calculated arrear amount to be 
written-off over 36 months. 


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2 . 1.2 


Where the 20% of the gross salary of the consumer, does not cover the monthly 
account, the whole account will placed on an abeyance account to be written off over 
a three year period, with the proviso that the monthly account is paid up to date every 
month. 

2.1.3 If the consumers default in terms of the above arrangement after three consecutive 
months this 20% option agreements fall away and whole arrear amount becomes due 
and payable. 

2.1.4 The suspended accounts will bear no interest on arrears. 

2.2 Churches, welfare organisations, sporting bodies, emerging farmers, etcetera 

2.2.1 The prescripts of the Writing-Off of Irrecoverable Debt Policy will be used to determine 
the acceptable arrangements on arrears. 

2.2.2 The customer may have two accounts in making such acceptable arrangements. A 
current account that must be paid up to date on a monthly basis and a suspended 
account that will carry the monthly arrangements instalments to be paid over a 
maximum of 24 months. 

2.2.3 The suspended account will bear no interest on arrears. 

2.3 Business, industrial and agriculture customers 

2.3.1 The prescripts of the Writing-Off of Irrecoverable Debt Policy will be used to determine 
the acceptable arrangements on arrears. 

2.3.2 The customer may have two accounts in making such acceptable arrangements. A 
current account that must be paid up to date on a monthly basis and a suspended 
account that will carry the monthly arrangements instalments to be paid over a 
maximum of 6 months. 

2.3.3 The suspended account will bear no interest on arrears. 

2.4 Government departments and schools 

2.4.1 lst default in financial year: 

(a) Three (3) weeks' notice - no arrangements; and 

(b) Deposit shall be adjusted to 3 months consumption. 


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2.4.2 2nd default in financial year: 

(a) Two (2) weeks' notice - no arrangements; and 

(b) Deposit shall be adjusted to 3 months consumption. 

2.4.3 3rd default in financial year: 

(a) Forty eight (48) hours' notice - no arrangements; and 

(b) Deposit shall be adjusted to 3 months consumption. 

2.5 Administrations 

2.5.1 Where a person has been placed under administration the following procedures will 
be followed: 

(a) The debt as at the date of the administration court order will be placed on hold, 
and collected in terms of the court order by the administrator's dividend; 

(b) The administrator is to open a new account on behalf of the debtor, with an 
updated deposit. No account is to be opened / operated in the debtor's name 
as the debtor is not entitled to accumulate debt (refer section 74S of the 
Magistrates Courts, No 32 of 1944; 

(c) Until such time as this new account is opened, the debtor is to be placed on 
limited service levels. The consumer will be compelled to install a prepaid 
electricity and water meter, should one not already be in place. The 
Municipality will be entitled to recover the cost of the basic services by means 
of purchases made on the prepaid meter/s; and 

(d) Should there be any default on the current account, the supply of services is to 
be limited or terminated on reasonable notice to the owner and consumer, and 
the administrator handed over for the collection of this debt. 

2.6.1 Indigent households 

2.6.1 All consumers qualifying as indigent households will receive monthly indigent support 
provided that a pre-paid water and/or pre-paid electricity meter may be installed on 
Council's cost. All arrear debt will be written-off as a once-off exercise per financial 
year. 


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2.6.2 Council acknowledges that pre-paid water and electricity meters cannot be installed 
at once and that this can only be done as and when the operating budget of the 
Municipality has available funds to install these meters. 

2.6.3 Council also acknowledges that indigent households cannot afford to replace broken 
conventional and pre-paid electricity and water meters with new ones. They are also 
not in a financial position to replace broken electricity and water connections as well 
as to pay for minor repairs to sewerage connections and blockages. For this purpose 
Council will budget in their operating for such costs. Pre-paid electricity and water 
meters and minor repairs to service connections may therefore be done from Council's 
budgeted funds provided that the relevant Executive Manager has motivated such a 
request, that adequate funds on the operating budget is still available and that the City 
Manager or Chief Financial Officer has approved such a request. 


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ANNEXURE C: APPLICATION FORM FOR INDIGENT HOUSEHOLDS 


Indigent Application Number: 


Indigent, Child headed, Retired and Disabled Households 

Category A: Income RO - R4,450 

IND 100 


Category B: Income R4,451- R4,950 

IND 080 


Category C: Income R4,951- R6,200 

IND050 


Category D: Income R6,201- R6,500 

IND020 



1. APPLICATION FOR INDIGENT HOUSEHOLD & OTHER SUPPORT 

1.1 In an effort to assist the needy population in the payment of basic municipal services, as detailed in the enclosed pamphlet, the Municipal Council of Drakenstein 
Municipality has agreed to a subsidy scheme whereby households earning less than R4,450 per month (2 x old age or social grant pension amount approved by the Minister 
of Finance x 25%) will have certain services fully or partly subsidised. 

1.2 Please read the back of this form to see if you qualify and what documents or forms you are required to submit with this application. If you feel that you do qualify, you 
must complete the details of all the occupants (owner / spouse / tenants) who are responsible for the payment of municipal services on a property as at or from the date 
of this application, together with their respective gross monthly incomes, in the space below. 

2. PERSONAL PARTICULARS OF ALL OCCUPANTS RESPONSIBLE FOR PAYING THE MUNICIPAL SERVICES 


NO. 

INITIALS 

SURNAME 

IDENTITY NUMER 

MARRIED 

CUSTOMARY 

DIVORCED 

SINGLE 

EMPLOYED 

(YES/NO) 

EMPLOYER NAME 

GROSS 

MONTHLY INCOME 

SOURCE OF INCOME 

1 










R 


2 










R 


3 










R 


4 










R 



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NO. 

INITIALS 

SURNAME 

IDENTITY NUMER 

MARRIED 

CUSTOMARY 

DIVORCED 

SINGLE 

EMPLOYED 

(YES/NO) 

EMPLOYER NAME 

GROSS 

MONTHLY INCOME 

SOURCE OF INCOME 

5 










R 


6 










R 


7 










R 


8 










R 


9 










R 


10 










R 



3. DECLARATION BY APPLICANT 

I, the undersigned, resident at the address indicated above, hereby apply for the Household Indigent Support determined in relation to the income indicated above, and solemnly 

declare that: 

(a) All particulars furnished on this form, including the total gross income of myself and all occupants of the premises, are to the best of my knowledge and belief, true and 
correct; 

(b) If the particulars furnished in this form should change for any reason, I will immediately notify Council; 

(c) I am aware that the information supplied in this form by me will be made available by Council to the Credit Bureau; 

(d) I or any other occupant do not own any other property in the Republic of South Africa apart from the property indicated on the account for which this application is 

made; 

(e) I agree that Council officials may conduct an on-site audit to verify the information supplied on this declaration; 

(f) I am aware that any false declaration on this form is punishable by law and will result in disqualification of the subsidy; and 

(g) I do hereby acknowledge that the debts in respect of the arrears amounting otherwise to R_as at_(together with 

interest accrued at the standard interest rate) on the account number indicated above remain payable by me unless Council resolves otherwise. 


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(h) 


I agree to the installation of a prepaid electricity meter and / or a prepaid water should my account fall in arrears for a period longer than 90 days or more. 


SIGNATURE / THUMB PRINT OF APPLICANT 


DATE 


COMMISSIONER OF OATH 


FOR OFFICE USE ONLY 

The consequences of the above declaration made by the applicant were explained to him/her and he/she indicated that: 

(a) The contents of the declaration were understood; and 

(b) If found to be untrue, he/she would automatically be disqualified from receiving any indigent support. He/she will be liable for the immediate repayment of any indigent 
support received and may have criminal proceedings instituted against him/her as Council may deem fit. 

Municipal Attesting Officer:_ 


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ANNEXURE D: INDIGENT HOUSEHOLD SUPPORT SCHEME 


VERIFICATION OF INFORMATION SUPPLIED: ACCOUNT NUMBER/S 

1 . 


2 . 


In terms of the Indigent Support Scheme, the applicant has agreed that municipal employees 
may conduct an on-site audit to verify the information supplied on the application form. 

SECTION A: PARTICULARS OF ACCOUNT HOLDER/S 

1. Surname:_ 

2. First names:_ 

3. Dateofbirth:_ 

4- Residential Address:_ 

5. Postal address:_ 

6. ID number:_ 

7. Telephone no. on site:_ 

8. Person/s interviewed:_ 

9. Number of people living 

on the property_ 

SECTION B: INCOME OF HOUSEHOLD 


I.D. Number 

Initials and Surname 

Gross 

Monthly 

Income 

Source of Income 

Employed 

Yes/No 

Proof of 

Income 





























































TOTAL 




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ANNEXURE E: APPLICATION FOR MUNICIPAL SERVICES 


TOWNSHIP: _ 

STAND NO: _ 

A. Please render/ *discontinue the following services on_ (Date) 

(_working days' notice is required) 

Deposit payable: R_Receipt no:_Date:_ 

Existing account no:_New account no:_ 


WATER PROVISION 

SEWERAGE (TOILET) 

ELECTRICITY 

REFUSE 

Communal 

Standpipe 

Yard 

Tap 

House 

Connection 

Bucket 

Water 

Connection 

Prepaid 

Credit meter 

Removal 










TYPE OF SUPPLY: 


Domestic 


Commercial 


Industrial 


Educational 


State 


Agricultural 


State whether any type of business activities to be conducted from residential address (Mark with a cross (X)) 

YES 

NO 


At street address: 

TYPE OF BUILDING 


House 


Business 


Flat 


Complex 


Sectional 

Title 


Other 



B. PERSONAL INFORMATION OF APPLICANT/CUSTOMER 


Trust/ Close Corporation/Company name: 

Trust/ Close Corporation/Company registration no .: 1 

Surname: 

ID Number: 

First Names: 

Pension Number: 

Previous Address: 

Postal Address: 

Employer: 

Work Address: 

Employee Number: 

Postal Code: 

Number of years at current site : 

Tel. Work: 

Tel. Flome: 

Occupation: 

Cell No: 


1 No application form will be considered unless copies of the relevant registration forms are attached 


Marital Status: 

Bank Details: 

Spouse Details: 

Branch: 


Customer Care, Credit Control, Debt Collection and Indigent Support Policy - 

46 








































































ID Number: 
Cell No.: 


Account No: 


Name of Employer: 

Work Address: _ 

Work Tel. No.: 


Do you wish to make use of: 

Debit order: |YES| 

Stop order: |YES| 

Vehicle Registration No: 


(In/out community of property/Marital Status Contract /Divorced)(Delete that is not appropriate) 
List of other accounts held: 1 _ AccountNo.: 

2 _ AccountNo.: 

3 _ AccountNo.: 

Previous municipal account_ (Name of municipalitv) _ Account No.: 

Occupiers of stand otherthan family (rental, backyard lodgers, spaza shops, taxis, etc):_ 

Number of people residing on property: 



Over 18: 


Under 18: 



Income of household if applying for indigent support 

(Include all sources of revenue of all the persons residing on the site): R. 


per month 


Method of account delivery: Fax □ Fax No: 

E-mail □ E-mail address: 


Post 


□ 


Name and address of a family member and/or friend not residing at the same address:. 


Tel. No.: 


If not the owner, to whom do you pay rent: 


C. TO BE COMPLETED BY OWNER/AGENT/CARETAKER FOR LEASED PROPERTIES 


Surname: 

First Names: 

Flome 

Address: 

ID Number: 

Name of Employer: 

Date: 

Signature: 



D. DECLARATION BY APPLICANT 


1. I hereby declare that l/we agree to the conditions of supply of the mentioned services as laid down in the by-laws of 

the Municipality and other laws that are applicable. 

2. I/We hereby certify the information furnished to be correct. 

3. I/We hereby accept the street address/stand number specified above as my own domicilium citandi et executandi 

address where I will accept any notices to be served. 

4 l/We received a duplicate of this application form and am/are aware of the applicable further conditions of supply set 
out in the annexure at the back of this form. 

5 l/We agree that the terms of the Municipal Customer Care, Credit Control, Debt Collection and Indiqent Policv are 

included bv reference as terms and conditions of this supplv 


CUSTOMER/APPLICANT 


ON BEHALF OF MUNICIPALITY 


DATE: 


DATE: 


Customer Care, Credit Control, Debt Collection and Indigent Support Policy 


47 































































DRAKENSTEIN 

MUNISIPALITEIT • MUNICIPALITY • UMASIPALA 
Paarl | Wellington | Gouda I Saron | Simondium 


Tariff Policy 


www.drakenstein.gov.za 


A city of excellence 





CONTENTS 


PREAMBLE.3 

1. DEFINITIONS.4 

2. PURPOSE OF THIS POLICY.7 

3. TARIFF PRINCIPLES.7 

4. CATEGORIES OF CUSTOMERS.8 

5. INVESTMENTS AND INCENTIVE POLICY.8 

6. INDIGENT RELIEF.8 

7. SERVICE- AND EXPENDITURE CLASSIFICATIONS AND COST ELEMENTS.9 

8. TARIFF TYPES.12 

9. CALCULATION OF TARIFFS FOR MAJOR SERVICES.13 

10. NOTIFICATION OF TARIFFS, FEES AND SERVICE CHARGES.19 

11. IMPLEMENTING AND PHASING IN OF THE POLICY.20 

12. PROCEDURES AND ACCOUNTABILITY.20 

13. SHORT TITLE.21 


Tariff Policy 


2 


















PREAMBLE 


Whereas section 74 of the Local Government: Municipal Systems Act, No 32 of 2000, requires 
a municipal council to adopt a tariff policy on the levying of fees for municipal services; 

And whereas the tariff policy at least should include the principles contained in section 74(2) 
of the Act; thus giving effect to the By-Law required in terms of section 75 of the Act; 

And whereas the tariff policy may differentiate between different categories of users, 
debtors, service providers, service standards and geographical areas as long as such 
differentiations do not amount up to unfair discrimination; 

Now therefore the Municipal Council of Drakenstein Municipality adopts the following Tariff 
Policy: 


Tariff Policy 


3 




DEFINITIONS 


1 . 

1.1 In this Tariff Policy, unless inconsistence with the context, a word or expressions to 
which a meaning in the Act has been attached means: 

1.1.1 "Accounting Officer" means the Accounting Officer appointed in terms of section 82 
of the Local Government: Municipal Structures Act, No 117 of 1998, and being the 
head of administration and Accounting Officer in terms of section 55 of the Local 
Government: Municipal Systems Act 2000, No 32 of 2000. 

1.1.2 "Basic Charge" means a fixed charge to recover fixed costs such as capital, meter 
reading, billing, vending, maintenance, etc. It may be recovered as a daily or monthly 
charge, but it is not applicable to subsidised tariffs. It is applicable irrespective of 
whether any services were used or not. 

1.1.3 "Basicmunicipalservices" means municipal services that are necessary to ensure an 
acceptable and reasonable quality of life and, if not provided, could endanger public 
health or safety of the environment. For Drakenstein Municipality this shall include 
inter alia electricity, water, refuse removal and sewerage services. 

1.1.4 "Break-even" occurs when the revenue is equal to the total of the fixed and variable 
cost associated with the provision of the service. 

1.1.5 "Co-generation" means the self-generation of electricity for consumption purposes 
used in conjunction with electricity from the municipal grid. 

1.1.6 "Community services" are services that the Council has classified as such and the 
tariffs have been compiled with the intention that the costs of the services cannot be 
recovered fully from public service charges and are of a regulatory nature. 

1.1.7 "Connection fee" means the fee payable as a contribution towards the cost of 
providing supply. This may be subsidised to facilitate the provision of services to poor 
households; 

1.1.8 "Consumption based tariff" means a tariff set as a Rand amount per measurable unit 
of service; 

1.1.9 "Cost reflective tariff" means a two part tariff consisting of a Basic Charge and an 
Energy Charge or a three part tariff which includes a Demand Charge; 


Tariff Policy 


4 




1.1.10 "Consumer, customer, owner, occupier and account-holder" in this policy refers to 
individuals and other legal entities against whom a tariff, fee, charge or other levy 
specific to identifiable services are levied. 

1.1.11 "CPIX" means the consumer price index excluding mortgage costs as measured by 
Stats SA; 

1.1.12 "Credit Meter" means a meter where an account is issued subsequent to the 
consumption of the service (water or electricity); 

1.1.13 "Demand Charge" means the charge payable for each kilovolt-ampere (kVa) for the 
maximum demand supplied during any 30 consecutive minutes of a calendar month; 

1.1.14 "Economic services" are services that Council has classified as such and the tariffs 
have been compiled with the intention that the total costs of the services are 
recovered from customers. 

1.1.15 "Energy Charge" means a charge for each kilowatt-hour (kWh) of electrical energy; 

1.1.16 "Executive Director" means a person appointed by Council in terms of section 56(1) 
(a) of the Act as a manager directly accountable to the municipal manager. 

1.1.17 "Green Energy" means energy generated from a sustainable source such as solar, 
wind or wave; 

1.1.18 "Interest" means the prime bank lending rate 

1.1.19 “Low Voltage (LV)" means 230 volts single phase / 400 volts three phase; 

1.1.20 "Medium Voltage (MV)" means the set of voltage levels greater than lkV up to and 
including 44kV; 

1.1.21 "Meter" means a device that records the demand and / consumption of a specific 
service (water or electricity) and includes Credit and Prepayment meters; 

1.1.22 "Poor households" means those households in the municipal area that cannot afford 
to pay either the entire tariff charge for the municipal services, or part of it. 

1.1.23 "Prepayment Meter" means a meter that can be programmed to allow the flow of a 
pre-purchased amount of energy in an electrical circuit or water circuit. 


Tariff Policy 


5 




1.1.24 "Refuse removal service point" means any inhabitable unit on an erf (dwelling, flat, 
etcetera) where a standard refuse collection service is rendered notwithstanding the 
number of bins collected at the service point. 

1.1.25 "Resident" means a person who ordinary resides in the jurisdictional area of 
Drakenstein Municipality. 

1.1.26 "Schedule of Tariffs" means a schedule containing details pertaining to levels and 
application of various tariffs as approved by the Municipality from time to time; 

1.1.27 "Special Tariffs" means a special tariff which may be introduced from time to time in 
terms of sub-paragraph 74(2) (g) of the Municipal Systems Act 

1.1.28 "Sundry Tariff" means a charge for additional general services rendered such as 
reconnections, disconnections, meter testing, etc. These will be published in a tariff 
schedule, which may be adjusted from time to time; 

1.1.29 "The Act" refers to the Local Government: Municipal Systems Act, No32of2000. 

1.1.30 "Total cost" is the sum of all fixed and variable costs associated with a service. 

1.1.31 "Trading services" are services that the Council has classified as trading services and 
the tariffs have been compiled with the intention that the Council makes a profit on 
the delivery of the services. 

1.1.32 "Units consumed" are the number of units consumed of a particular service. 

1.1.33 "Variable costs" are costs that vary with consumption or volume produced. 

1.2 About translation 

1.2.1 In the event of any discrepancy between the Xhosa, Afrikaans or English versions of 
this policy, the English version will be regarded as the official version of the said 
policy. 


Tariff Policy 


6 





2 . 


PURPOSE OF THIS POLICY 


2.1 Drakenstein Municipality wishes to achieve the following objectives by adopting this 
Tariff Policy: 

(a) To comply with the provisions of section 74 of the Local Government: 
Municipal Systems Act, No 32 of 2000; 

(b) To prescribe procedures for calculating tariffs where the municipality wishes to 
appoint service providers in terms of section 76(b) of the Act; and 

(c) To give guidance to the Executive Mayor and Mayoral Committee regarding 
tariff proposals that must be submitted to Council annually during the budget 
process. 

3. TARIFF PRINCIPLES 

3.1 Drakenstein Municipality wishes to record that the following tariff principles will 
apply: 

(a) All users of municipal services will be treated equitably; 

(b) The amount payable by consumers and/or owners will generally be in 
proportion to usage of the service; 

(c) Poor households must have access to basic services, however relief will be 
granted to poor households on a universal approach and not a targeted 
approach; 

(d) Free basic services will depend on the equitable share grant received from the 
National Government which covers the full costs of the free basic services; 

(e) Tariffs must reflect the total cost of services; 

(f) Tariffs must be set at a level that facilitates the sustainability of services. 
Sustainability will be achieved by ensuring that: 

(i) Cash inflows cover cash outflows. This means that sufficient provision for 
working capital and bad debts will be made; 

(ii) Access to the capital market is maintained. This will be achieved by 
providing for the repayment of capital, maintaining sufficient liquidity 
levels and making profits on trading services in order to subsidise rates 
and general services; and 

(iii) By ensuring that service providers retain a fair rate of return on their 
investments; 

(g) Provision may be made in appropriate circumstances for levying interest; 

(h) Efficient and effective use of resources may be encouraged by providing for 
penalties to prohibit or restrict exorbitant use; 


Tariff Policy 


7 




(i) The extent of subsidisation of tariffs will be disclosed and such disclosure will 
include the extent of subsidisation of the poor or incentives for local economic 
development; 

(j) Provision may be made for the promotion of local economic development 
through special tariffs for categories of commercial and industrial users; 

(k) VAT is excluded from all tariffs and will be additional to these tariffs when 
applicable; and 

(l) This policy shall be binding on all tariffs other than those governed by 
legislation, which supersedes the Local Government: Municipal Systems Act, 
No 32 of 2000. 

3.2 Notwithstanding any of the above principles, indigent households and households 
qualifying for financial assistance identified as such would qualify for relief in terms 
of section 6 of this Policy. 

4. CATEGORIES OF CUSTOMERS 

4.1 Council may differentiate between different categories of users, debtors, service 
providers, services, service standards, geographical areas and other matters as long 
as the differentiation does not amount to unfair discrimination. 

4.2 Where there are substantial differences between the infrastructures used to provide 
services to specific groups of users within a category and /or standard of services 
provided, the Council can, after considering a report by the Accounting Officer or the 
relevant executive manager of a Department determine differentiated tariffs for the 
different consumers within the specific category. 

5. INVESTMENTS AND INCENTIVE POLICY 

5.1 Tariffs will not reflect incentives for investment or to promote economic 
development. Such incentives will be developed as a separate policy and be subject 
to the discretion of Council in order to enhance sustainability. 

5.2 All such incentives will be reflected, accounted for and disclosed separately in 
invoices, account statements, budgets, financial statements or reports. 

6. INDIGENT AND FINANCIAL RiUif- ASSISTANCE 

6.1 Tariffs will not reflect relief granted to poor households. Such incentives will be 
developed in separate policies (Customer Care, Credit Control, Debt Collection and 


Tariff Policy 


8 









Indigent Support Policy and Property Rates Policy) and be subject to the discretion of 
Council in order to enhance sustainability. 

6.2 As such relief will be reflected, accounted for and disclosed separately in invoices, 
account statements, budgets, financial statements or reports. 

6.3 During implementation of these policies, cognisance will be taken of the fact that the 
existing tariffs and procedures may require amendment to accommodate the above 
clauses and that such amendments may be phased in over time. 

6.4 Poor households are expected to manage their consumption beneath the levels of 
relief granted and are responsible for the payment of electricity and water 
consumption above the levels of relief granted. 

6.5 Assistance and management of poor households is contained in the Customer Care, 
Credit Control, Debt Collection and Indigent Support Policy and Property Rates Policy 
with their applicable by-laws. The Municipality, however, retains the right to limit 
consumption through prepaid meters or restriction of services if the account of an 
assisted household falls into arrears. 

7. SERVICE- AND EXPENDITURE CLASSIFICATIONS AND COST ELEMENTS 

7.1 Service Classification 

7.1.1 To isolate the costs associated with a service, the Chief Financial Officer shall, subject 
to guidelines provided by National Treasury of the Department of Finance and / or 
the Municipal Council, make provision for inter alia the following classification of 
services: 

(a) Tradinq Services 

(i) Water;and 

(ii) Electricity 

These services must generate a surplus which will be used to subsidize 

community services other than economical services. 

(b) Economic Services 

(i) Refuse removal; 


Tariff Policy 


9 







(ii) Sanitation disposal; 

(iii) Fixed billboards and the display of advertisements in public places; and 

(iv) Holiday resorts 

These services' charges must cover the cost of providing the services, i.e. it 
must at least break even. In the event of the latter not being possible within a 
period, the shortfall will be financed from the Municipal Property Rates 
revenue 

(c) Rates Services 


The revenue from Municipal Property Rates is utilized for Rates related 
services. 

(d) Housinq Services 

These services are ring-fenced in the Housing Development Fund and the net 
operating balance is set off as a contribution to/from the Housing Development 
Fund. 

(e) Community Services 

(i) Air pollution; 

(ii) Administration and treasury services; 

(iii) Firefighting services; 

(iv) Local tourism; 

(v) Town planning; 

(vi) Municipal public works, only in respect of the needs of municipalities in 

the discharge of their responsibilities and to administer functions 
specially assigned to them under the Constitution or any other law; 

(vii) Storm water management system in built-up areas; 

(viii) Trading regulations; 

(ix) Cemeteries; 

(x) Control of public nuisances; 

(xi) Control of undertakings that sell liquor to the public; 

(xii) Crime prevention; 

(xiii) Facilities for accommodation, care and burial of animals; 

(xiv) Fencing and fences; 

(xv) Housing facilitation; 

(xvi) Licensing of dogs; 


Tariff Policy 


10 







(xvii) Licensing and control of undertakings that sell food to the public; 

(xviii) Local Economic development; 

(xix) Local amenities; 

(xx) Local sport facilities; 

(xxi) Marketing; 

(xxii) Municipal parks and recreation; 

(xxiii) Municipal roads; 

(xxiv) Noise pollution; 

(xxv) Pounds; 

(xxvi) Public places; 

(xxvii) Street trading / street lighting; 

(xxviii) Trading licenses; 

(xxix) Traffic and parking; 

(xxx) Building control; 

(xxxi) Licensing of motor vehicles and transport permits; and 
(xxxii) Nature reserves 

(f) Subsidised Services 

(i) Health and ambulance; 

(ii) Libraries and museums; and 

(iii) Proclaimed roads. 

7.2 Expenditure Classification 

7.2.1 Expenditure categories will be classified in accordance with Generally Recognised 
Accounting Practice (GRAP). 

7.3 Cost Elements 

7.3.1 The following cost elements may be used to calculate the tariffs of the different 
services: 

(a) Fixed Costs : 

Fixed costs consist of: 

(i) Employee related costs applicable to the service to ensure that the 
service can be rendered on an on-going basis at the desired service level; 


Tariff Policy 


11 








(ii) Capital costs (interest and depreciation) on external loans; depreciation 
on assets obtained through grants; as well as depreciation on assets 
obtained through own funds, whichever are applicable to the service; and 

(iii) Any othercosts of a permanent nature as determined by the Council from 
time to time. 

(b) Variable Cost : 

This includes all other variable costs that have reference to the service. 

(c) Total Cost : 

This is equal to the fixed cost plus variable cost. 

8. TARIFF TYPES 

8.1 In determining the type of tariff applicable to the type of service, the municipality 
shall make use of any of the following six options or a combination thereof. 

(a) Single tariff : 

This tariff shall consist of a cost per unit consumed. All costs will be recovered 
through unit charges at the level where income and expenditure breaks even. 
Subject to a recommendation by the Chief Financial Officer, the Council may 
decide to approve profits on trading services during the budget meeting. Such 
profits will be added to the fixed and variable cost of the service for the purpose 
of calculating the tariffs. 

(b) Cost related two to four part tariff : 

This tariff shall consist of two to four parts. Management, capital, maintenance 
and operating costs may be recovered by grouping certain components 
together e.g. management, capital and maintenance costs may be grouped 
together and may be recovered by a fixed charge, independent of consumption 
for all classes of consumers; or the total costs may be recovered by a unit 
charge per unit consumed. Three and four part tariffs will be used to calculate 
the tariff for electricity and to provide for maximum and notified demand (KVA 
charges) and usage (kWh charges) during peak, standard and off-peak (Time- 
of-use charges) periods. 


Tariff Policy 


12 








(c) Inclininq block tariff : 

This tariff is based on consumption levels being categorised into blocks, the 
tariff being determined and increased as consumption levels increase. 

(d) Declininq block tariff : 

This tariff is the opposite of the inclining block tariff and decreases as 
consumption levels increase. 

(e) Requlatinq tariff : 

This tariff is only of a regulatory nature and the Municipality may recover the 
full or a portion of the cost associated with rendering the service. 

(f) Cost plus mark-up tariff : 

This tariff is for other services rendered. 

9. CALCULATION OF TARIFFS FOR MAJOR SERVICES 

9.1 In order to determine the tariffs which must be charged for the supply of the four 
major services (electricity, refuse removal, sanitation and water), the Municipality 
shall use service and expenditure classifications and cost elements contained in 
paragraph 7 above and identify all the costs associated with the service concerned, 
including specifically the following: 

(a) Cost of bulk purchases in the case of water and electricity; 

(b) Distribution costs, including distribution losses in the case of water and 
electricity; 

(c) Depreciation and finance charges; 

(d) Maintenance of infrastructure and other fixed assets; 

(e) Administration and service costs, including: 

(i) Service charges levied by other support services such as finance, human 
resources, legal services, information technology services, etcetera; 

(ii) Reasonable general overheads such as the costs associated with the 
office of the Accounting Officer and etcetera; 

(iii) Adequate contributions to the provisions for bad debts, working capital 
and obsolescence of stock; and 


Tariff Policy 


13 








(iv) All other ordinary operating expenses associated with the service 
concerned including in the case of the electricity service, the cost of 
providing street lighting in the municipal area; 

(f) The cost of the democratic process in the municipality - that is all expenses 
associated with the political structures of the municipality - shall form part of 
the expenses to be financed from property rates and general revenues and shall 
also be included into the costing of the major services of the municipality; 

(g) The intended surplus to be generated for the financial year, such surplus to be 
applied: 

(i) As an appropriation to the capital replacement reserve; and / or 

(ii) Generally in relief of rates and general services; and 

(h) The municipality shall provide the first 6kl of water per month free of charge to 
all approved indigent households and households qualifying for financial 
assistance. 


9.2 Electricity 

9.2.1 The guidelines and policy issued by the National Electricity Regulator from time to 
time will form the basis of calculating tariffs. 

9.2.2 To make electricity affordable to certain categories of consumers, cross subsidisation 
between and within categories of consumers, will be allowed based on the load 
factors of the categories and consumers within the category. 

9.2.3 To cater for alternative sources of energy generation a co-generation tariff based on 
the amount of green energy pushed back into the municipal grid has been 
determined. 

9.2.4 The fixed costs or portions thereof will be recovered through an energy or time-of- 
use charge. 

9.2.5 To apply the abovementioned principles, the consumer types and cost allocations 
reflected in the following table will be used: 


Tariff Policy 


14 







Categories of 

consumers 

Fixed Charge 
Rand/Customer 
/Month 

Active Energy 
Charge 
Cents/kWh 

Seasonally 
Time-of-Use 
Energy Charge 
Peak/Standard/ 
Off-Peak (kWh) 

Capacity Charge 
Rand/KVA/ 
Month 

Domestic Pre-paid 

X 

X 


X 

Domestic 

X 

X 


X 

Business Pre-paid 

X 

X 


X 

Small business >60A 

X 

X 


X 

Small business <60A 

X 

X 


X 

Business = 400 V 

X 

X 


X 

Business = 11 kV 

X 


X 

X 

Co-Generation 

X 

X 

X 



9.2.6 Fixed charges and capacity charges may be combined to a single basic charge to be 
levied per month. 

9.2.7 The basic charges for both credit and pre-paid electricity shall be the same. 

9.2.8 Where a property is not connected to the electricity reticulation system, but can 
reasonably be so connected, an availability tariff will be payable. 

9.3 Water 

9.3.1 The categories of water consumers as set out below, shall be charged at the 
applicable tariffs as approved by the council in each annual budget. 

9.3.2 Categories of consumption and charges 

9.3.2.1 Domestic Consumers 


(a) The first 6 (six) Kl of water consumption per month shall be supplied free of 
charge to all indigent households consum e rs and to households qualifying for 
financial assistance. 

(b) Because water is a scarce national resource and this municipality is committed 
to the prudent conservation of such resources, the tariff levied for domestic 
consumption of water shall escalate according to the volume of water 
consumed. 


Tariff Policy 


15 























(c) The tariffs for conventional domestic consumption shall be based on the levels 
reflected in the following table: 


Kilolitres per month 

Step 1 

0 

to 

<6 

Step 2 

>6 

to 

<10 

Step 3 

>10 

to 

<15 

Step 4 

>15 

to 

<30 

Step 5 

>30 

to 

<50 

Step 6 

>50 

to 

<80 

Step 7 

>80 

and 

above 


(d) The pre-paid domestic consumers' tariff shall be based on the levels reflected 
in the following table: 


Kilolitres per month 

Step 1 

0 

to 

<6 

Step 2 

>6 

to 

<10 

Step 3 

>10 

to 

<15 

Step 4 

>15 

to 

<30 

Step 5 

>30 

to 

<50 

Step 6 

>50 

to 

<80 

Step 7 

>80 

and 

above 


(e) Domestic Untreated water: 


Kilolitres per month 

Step 1 

0 

to 

<6 

Step 2 

>6 

to 

<10 

Step 3 

>10 

to 

<15 

Step 4 

>15 

to 

<30 

Step 5 

>30 

to 

<50 

Step 6 

>50 

to 

<80 

Step 7 

>80 

and 

above 


(f) A basic charge per water meter as determined by the Council from time to time 
will be charged on all water consumers. 


Tariff Policy 


16 





































(g) Where consumers are not connected to the water services and these 
consumers can reasonable connect to the service within an approved township 
establishment, an availability tariff will be payable. 

(h) A water restriction tariff is approved by Council annually to be implemented 
during times of water restrictions forced onto us by our suppliers of water or 
drought conditions. This increased tariff will be applied to all the categories and 
their usage levels as illustrated in paragraph c and e above. 

9.3.2.2 Other Water consumers 


Categories of consumers 

Single Tariff 

Sliding Scale 

Sport Purposes, Schools, College, Churches 


X 

Irrigation Purposes 


X 

Industrial Purposes 


X 

Any other purposes other than above 

X 


Waste water effluent 


X 

Sport Organisation hosting national or international events 

X 


Prisons 

X 


Caravan Park Gouda 

X 


Businesses Saron 


X 

Business Rural Area 

X 


Special Agreements 


X 

Municipal Usage 

X 


Water sold at Paarl Waterworks Depot (To be paid in advance) 

X 


Usage due to transgression 

X 


Standpipes 

X 



9.3.3 A basic/availability charge per month shall be charged to every vacant erf. 

9.4 Refuse Removal 

9.4.1 A fixed monthly refuse removal charge shall apply to each category of users based on 
the full costs of the service concerned and the applicable level of service that can vary 
from once a week up to seven times a week. 

9.4.2 The fixed charge referred to in paragraph 9.4.1 above will apply to every refuse 
removal service point as defined and the costs associated with its disposal. 


Tariff Policy 


17 
























9.4.3 A basic/availability charge per month shall be charged to every vacant erf. 

9.4.4 A basic/availability charge per month shall be charged to each developed erf within 
a gated village, sectional title estate or any other property that make use of a private 
contractor for collection and disposal of refuse. The basic/availability charges per 
month for the above categories will be based on the difference between the number 
of refuse bins and the number of waste generators (registered sectional title units, 
lettable space, flats etc.) 

9.5 Sewerage 

9.5.1 The categories of sewerage users as set out below shall be charged per month at the 
applicable tariff as approved by Council in each annual budget. 

9.5.2 Categories of usage and charges 

(a) A basic (availability) charge per month shall be charged for vacant erven. 

(b) A separate fixed monthly sewerage charge shall apply to each category of users 
based the size of a developed plot. 

(c) An additional monthly fee may be charged per toilet or any other type of 
measurement Council may determine from time to time. 

(d) An effluent fee shall further be payable by factories and other industrial users 
where the waste water emanating from such users requires special purification 
measures by the municipality. Such fees shall be based on the toxic content of 
the waste water concerned and the costs of the purification. 

9.6 Minor tariffs 

9.6.1 All minor tariffs shall be standardised within the municipal region. 

9.6.2 All minor tariffs shall be approved by Council in each annual budget and shall, when 

deemed appropriate by Council, be subsidised by property rates and general 
revenues, particularly when the tariffs will prove uneconomical when charged to 
cover the cost of the service concerned, or when the cost cannot accurately be 
determined or when the tariff is designed purely to regulate rather than finance the 
use of the particular service or amenity. 


Tariff Policy 


18 







9.6.3 Minor tariffs shall include but not limited to the following: 


(a) Cemetery fees; 

(b) Housing rentals; 

(c) Library fees (e.g. membership fees, fines, lost books, lost membership cards); 

(d) Rentals for the use of municipal premises; 

(e) Rentals for the use of municipal sports grounds; 

(f) Rentals for the lease of municipal property; 

(g) Building plan fees; 

(h) Advertising sign fees; 

(i) Plastic bag sales; 

(j) Refuse bin sales; 

(k) Cleaning of stands; 

(l) Sewerage connection fees; 

(m) Photostat copies and faxes; 

(n) Clearance certificates; 

(o) Pound fees; 

(p) Electricity: disconnection and reconnection fees; 

(q) Electricity: new connection fees; 

(r) Water: disconnection and reconnection fees; 

(s) Water: new connection fees; 

(t) Penalty and other charges in terms of the Customer Care, Credit Control, Debt 
Collection and Indigent Support Policy; 

(u) Supply of information; 

(v) Garden refuse removal; 

(w) License fees (drivers, learner license and road worthy); 

(x) Sale of livestock; and 

(y) Sale of miscellaneous items. 

9.6.4 The Accounting Officer shall maintain a list of all minor services indicating their unit 
of service for the purpose of determining tariffs, fees, charges and levies. Such list 
shall be reviewed annually together with the proposed tariffs, fees, charges and 
levies. 

10. NOTIFICATION OF TARIFFS, FEES AND SERVICE CHARGES 

10.1 After a draft budget as required by the Local Government: Municipal Finance 
Management Act (MFMA) has been tabled, the Accounting Officer must invite the 
local community to submit representations for consideration by Council. Such 
invitation includes the draft resolutions on taxes and tariffs proposed. 


Tariff Policy 


19 




10.2 After approval of the annual budget in terms of section 24 of the MFMA, Council will 
give notice in terms of section 75A of the Act of all tariffs approved at the annual 
budget meeting and the Municipal Manager shall without delay conspicuously 
display a copy of the resolution for a period of at least 30 days at the main 
administrative office of the Municipality and at such other places within the 
Municipality to which the public has access as the Municipal Manager may 
determine. 

10.3 A notice stating the purpose of the Council Resolution, date on which the new tariffs 
shall become operational and invitation for objections, will be advertised by the 
Municipality in terms of section 75A(3)(b) of the Act. 

10.4 All tariffs approved must have been considered at the annual budget meeting. 

11. IMPLEMENTING AND PHASING IN OF THE POLICY 

11.1 The principle contained in this policy will be reflected in the various budget proposals 
submitted to Council on an annual basis, service by-laws as promulgated and 
adjusted by Council from time to time and the tariff by-laws referred to in Section 75 
of the Act. 

11.2 Council may determine conditions applicable to a community service of a regulatory 
nature. These conditions will be reflected in the standing orders of Council. 

11.3 Jurisdiction and other differences in tariffs, if applicable, will be phased in over three 
financial years after the 2012/2013 financial year. 

12. PROCEDURES AND ACCOUNTABILITY 

12.1 The Accounting Officer shall ensure that procedures to manage all aspects of this 
policy are prepared in the form of a manual, reviewed regularly and that these are 
formally adopted by him/her for implementation. These procedures will include 
aspects in this policy and subscribe to sound principles of internal control. 

12.2 The executive manager of a Department shall ensure compliance with the procedures 
as approved from time to time by the Accounting Officer to give effect to the 
provisions of this policy. 


Tariff Policy 


20 




13. SHORT TITLE 

13.1 This policy is the Tariff Policy of Drakenstein Municipality. 


Tariff Policy 





DRAKENSTEIN 

MUNISIPALITEIT • MUNICIPALITY • UMASIPALA 
Paarl | Wellington | Gouda I Saron | Simondium 


Property Rates 
Policy 


www.drakenstein.gov.za 


A city of excellence 





TABLE OF CONTENTS 


PAGE 

1. LEGISLATIVE CONTEXT.3 

2. DEFINITIONS.3 

3. OBJECTIVES OF THE POLICY.13 

4. POLICY PRINCIPLES.15 

5. CLASSIFICATION OF SERVICES.16 

6. CATEGORIES OF PROPERTY.17 

7. CATEGORIES OF OWNERS.20 

8. MULTI PURPOSE USE OF PROPERTIES.21 

9. DIFFERENTIAL RATING.22 

10. EXEMPTIONS AND IMPERMISSIBLE RATES.22 

11. REDUCTIONS.24 

12. REBATES.25 

13. IMPERMISSIBLE RATES.34 

14. PAYMENT OF RATES.35 

15. ACCOUNTSTO BE FURNISHED.36 

16. RATES CLEARANCE CERTIFICATES.37 

17. CREDIT REFUNDS.37 

18 PHASING IN OF RATES.38 

19. SPECIAL RATING AREAS.38 

20. FREQUENCY OF VALUATION.40 

21. OBJECTION AND APPEALS.40 

22. COMMUNITY PARTICIPATION.41 

23. REGISTER OF PROPERTIES.42 

24. BY-LAWS TO GIVE EFFECT TO THE PROPERTY RATES POLICY.42 

25. REGULAR REVIEW PROCESSES.43 

26. SHORTTITLE.43 


Property Rates Policy 


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DRAKENSTEIN MUNICIPALITY 


PROPERTY RATES POLICY 


1. LEGISLATIVE CONTEXT 

1.1 Section 229 of the Constitution of the Republic of South Africa, No 108 of 1996, 
determines that a municipality may impose rates on property subject to any regulated 
national legislation. 

1.2 Section 2 of the Local Government: Municipal Property Rates Act, No 6 of 2004, 
determines that a municipality may levy a rate on property in its area subject to: 

(a) Section 229 and any other applicable provisions of the Constitution; 

(b) The provisions of the Municipal Property Rates Act (MPRA); and 

(c) The rates policy it must adopt in terms of section 3. 

1.3 Section 3 of the MPRA determines that the council of a municipality must adopt a 
policy consistent with the MPRA on the levying of rates on rateable property in the 
municipality. 

1.4 Section 4(l)(c)(ii) of the Local Government: Municipal Systems Act, No 32 of 2000, 
determines that the council of a municipality has the right to finance the affairs of the 
municipality by imposing, inter alia, rates on property. 

1.5 Section 62(l)(f)(ii) of the Local Government: Municipal Finance Management Act, 
No 56 of 2003, the Municipal Manager must ensure that the municipality has and 
implements a rates policy. 

1.6 This policy must be read together with, and is subject to the stipulations of the MPRA 
and any regulations promulgated in terms thereof. 

2. DEFINITIONS 

2.1 "Accommodation" means accommodation in an accommodation establishment: a 

room, dwelling-house or second dwelling unit, self-catering room, self-catering 
apartment or free standing building let to transient guests; 


Property Rates Policy 


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2.2 "Accommodation establishments" means one or more of the following lettable types 

of accommodation: 

(a) "Camping" (informal temporary accommodation in a unique environment) is 
defined by a property used for erection of tents or other temporary structures 
for temporary accommodation for visitors or holiday-makers, which includes 
ablution, cooking and other facilities that are reasonably and ordinarily related 
to camping , for use of such visitors, and includes a caravan park, whether 
publicly or privately owned, but which excludes the alienation of land on the 
basis of time sharing, sectional title share blocks or individual subdivision; and 
excludes resort accommodation or mobile homes; 

(b) "Bed and breakfast" (accommodation in a dwelling-house or second dwelling 
unit for transient guests) is defined by a dwelling-house or second dwelling in 
which the owner of the dwelling supplies lodging and meals for compensation to 
transient guests who have permanent residence elsewhere; provided that the 
primary use of the dwelling-house concerned shall remain for the living 
accommodation of a single family; 

(c) "Guest house" (accommodation in a dwelling-house or second dwelling unit for 
transient guests) is defined by a dwelling-house or second dwelling which is used 
for the purpose of supplying lodging and meals to transient guests for 
compensation, in an establishment which exceeds the restrictions of a bed and 
breakfast establishment and may include business meetings or training sessions 
for resident guests; 

(d) "Self-catering accommodation" (accommodation for non-permanent residents 
and transient guests) is defined by a house, cottage, chalet, bungalow, flat, 
studio, apartment, villa, or similar accommodation where facilities and 
equipment are provided for guests to cater for themselves. The facilities should 
be adequate to cater for the maximum advertised number of residents the 
facility can accommodate; 

(e) "Self-catering apartments" (accommodation for non-permanent residents and 
transient guests) is defined by a building or group of buildings consisting of 
separate accommodation units, each incorporating a kitchen facility (fully or 
partially), and which may include other communal facilities for the use of 
transient guests, together with outbuildings as are normally used therewith; 


Property Rates Policy 


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which are rented for residential purposes and may include holiday flats; but does 
not include a hotel, dwelling-house, second dwelling or group house; 

(f) "Backpackers accommodation" (accommodation and communal facilities in a 
building or free standing buildings for transient guests) is defined by a building 
where lodging is provided, and may incorporate cooking dining and communal 
facilities for the use of lodgers, together with such outbuildings as are normally 
used therewith and includes a building in which dormitories / rooms / beds are 
rented for residential purposes, youth hostel, and backpackers' lodge; but does 
not include a hotel, dwelling house, second dwelling or group house; or 

(g) "Boarding house" a dwelling-house or second dwelling which is used for the 
purpose of supplying lodging with or without meals or self-catering to non- 
permanent / permanent residents for compensation; provided that the primary 
use of the dwelling-house shall remain for the living accommodation of a single 
family. 

2.3 "Act" means the Local Government: Municipal Property Rates Act, No 6 of 2004 
(amended 01 July 2015). 

2.4 "Agent", in relation to the owner of a property, means a person appointed by the 
owner of the property: 

(a) To receive rental or other payments in respect of the property on behalf of the 
owner; or 

(b) To make payments in respect of the property on behalf of the owner. 

2.5 "Agricultural purpose" means a farm or small holding property that is used for the 
cultivation of soils for purposes of planting and gathering crops; forestry in the context 
of the planting, growing and sawing-off of trees in a managed and structured fashion; 
the rearing of livestock and game or the propagation and harvesting of fish; and: 

(a) In relation to the use of property, excludes the use of the property for the 
purpose of eco-tourism or for the trading in or hunting of game; 

(b) In relation to an agricultural unit used for irrigation purposes, includes all 
irrigation stands being operated by the same farmer as a single agricultural unit 
in the sole discretion of the Municipality; and 


Property Rates Policy 


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(c) In relation to an agricultural unit used for stock-farming purposes, includes all 
stock-farms being operated by a farmer as a single agricuItural unit in the sole 
discretion of the Municipality. 

2.6 "Agriculturalproperty" means propertythat is used primarilyfor agricultural purposes 
but, without derogating from section 9, excludes any portion thereof that is used 
commercially for hospitality of guests, and excludes the use of the property for the 
purpose of eco-tourism or for the trading in or hunting of game; 

2.7 "Annually" means once every financial year. 

2.8 "Business and commercial property" means: 

(a) Property used for the activity of buying, selling or trading in commodities or 
services and includes any office or other accommodation on the same property, 
the use of which is incidental to such activity; or 

(b) Property on which the administration of the business of private or public entities 
take place. 

2.9 "Category" 

(a) In relation to property, means a category of properties determined in terms of 
paragraph 6 of this policy; and 

(b) In relation to owners of properties, means a category of owners determined in 
terms of paragraph 7 of this policy. 

2.10 "Child-headed household" means a household where the main caregiver of the said 
household is younger than 18 years of age. Child-headed household means a 
household headed by a child as defined in terms of section 28(3) of the Constitution. 

2.11 "Definitions, words and expressions" as used in the Act are applicable to this policy 
document wherever it is used. 

2.12 "Household" means all persons (registered owner/s, occupier/s, vulnerable person/s 

or tenant/s) jointly living on a stand or site receiving sanitation, refuse removal, 

water and/or electricity services that is billed by the Municipality. 


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2.13 "Household income" means the gross sum of all monthly income from all sources 

including wages, salaries, profits, dividends, pensions, rentals, board & lodging, 

interest received, grants or investment income and other forms of earnings received 

by all persons residing on the property. 

2.14 "Industrial property" means property used for construction, repair, trade or 
manufacturing, production, assembly or processing of finished or partially finished 
products from raw materials or fabricated parts on such a large scale that capital and 
labour are significantly involved, and includes any office or other accommodation on 
the same property, the use of which is incidental to such activity. 

2.15 "Land reform beneficiary", in relation to a property, means a person who - 

(a) Acquired the property through - 

(i) The Provision of Land and Assistance Act, No 126 of 1993; or 

(ii) The Restitution of Land Rights Act, Act No 22 of 1994; 

(b) Holds the property subject to the Communal Property Associations Act, No 28 of 
1996;and 

(c) Holds or acquires the property in terms of such other land tenure reform 
legislation as may pursuant to section 25(6) and (7) of the Constitution be 
enacted after this Act has taken effect. 

2.16 "Land tenure right" means a land tenure right as defined in section 1 of the Upgrading 
of Land Tenure Rights Act, 1991 (Act No 112 of 1991). 

2.17 "Mining property", means a property used for mining operations as defined in the 
Mineral and Petroleum Resources Development Act, 2002 (Act No. 28 of 2002). 

2.18 "Multiple purposes" in relation to a property means the use of a property for more 
than one purpose, subject to section 9. 

(a) The different uses will be grouped into two or more components. The first will 
be the primary component; the other components (sub-components) will be 
identified by their generalised functional name. 


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(b) The category of the primary component of such a property will be directed in the 
first instance by the permitted use of the property, but at the sole discretion of 
the Municipality. 

2.19 "Municipality" means the Local Municipality of Drakenstein. 

2.20 "Newly rateableproperty" means any rateable property on which property rates were 
not levied before the end of the financial year preceding the date on which the Act 
took effect, excluding: 

(a) A property which was incorrectly omitted from a valuation roll and for that 
reason was not rated before that date; and 

(b) A property identified by the Minister by notice in the Gazette where the phasing- 
in of a rate is not justified. 

2.21 "Officerbearer" in relation to places of public worship, means the primary person who 
officiates at the services at that place of worship. 

2.22 "Official residence" in relation to places of public worship, means - 

(a) A portion of the property used for residential purposes; or 

(b) one residential property, if the residential property is not located on the same 
property as the place of public worship, 

registered in the name of the religious community or registered in the name of a trust 
established for the sole benefit of a religious community and used as a place of 
residence for the office bearer. 

2.23 "Owner": 

(a) In relation to a property referred to in paragraph (a) of the definition of 
"property", means a person/s in whose name ownership of the property is 
registered; 

(b) In relation to a right referred to in paragraph (b) of the definition of "property", 
means a person/s in whose name the right is registered; 


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(c) In relation to a time sharing interest contemplated in the Property Time-Sharing 
Control Act, 1983 (Act No.75 of 1983), means the management association 
contemplated in the regulations made in terms of section 12 of the Property 
Time-Sharing Control Act, 1983, and published in Government Notice R327 of 
24 February 1984; 

(d) In relation to a share in a share block company, the share block company as 
defined in the Share Block Control Act, 1980 (Act No. 59 of 1980); 

(e) In relation to buildings, other immovable structures and infrastructure referred 
to in section 17(l)(f), means the holder of the mining right or the mining permit; 

(f) In relation to a land tenure right referred to in paragraph (c) of the definition of 
"property", means a person/s in whose name the right is registered or to whom 
it was granted in terms of legislation; or 

(g) In relation to public service infrastructure referred to in paragraph (d) of the 
definition of "property", means the organ of state which owns or controls that 
public service infrastructure as envisaged in the definition of "publicly 
controlled": 

Provided that a person mentioned below may for the purposes of this Policy be 
regarded by the Municipality as the owner of a property in the following cases: 

(i) A trustee, in the case of a property in a trust excluding state trust land; 

(ii) An executor or administrator, in the case of a property in a deceased 
estate; 

(iii) A trustee or liquidator, in the case of a property in an insolvent estate; 

(iv) A judicial manager, in the case of a property in the estate of a person under 
curatorship; 

(v) A person in whose name a usufruct or other personal servitude is 
registered, in the case of a property that is subject to a usufruct or other 
personal servitude; 

(vi) A lessee, in the case of a property that is registered in the name of a 
municipality and is leased by it; 


Property Rates Policy 


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(vii) A buyer, in the case of a property that was sold by a municipality and of 
which possession wasgiven to the buyer pending registration of ownership 
in the name of the buyer; or 

(viii) A lessee, in the case of property to which a land tenure right applies and 
which is leased by the holder of such right. 

2.24 "Place of public worship" means property used primarily for the purposes of 
congregation, excluding a structure that is primarily used for educational instruction in 
which secular or religious education is the primary instructive medium: Provided that 
the property is - 

(a) Registered in the name of the religious community; 

(b) Registered in the name of a trust established for the sole benefit of a religious 
community or: 

(c) Subject to a land tenure right. 

2.25 "Privately owned towns serviced by the owner" means single properties, situated in 
an area not ordinarily being serviced by the Municipality, divided through sub-division 
or township establishment into (ten or more) full title stands and / or sectional units 
and where all rates-related services inclusive of installation and maintenance of 
streets, roads, sidewalks, lighting, storm water drainage facilities, parks and 
recreational facilities are installed at the full cost of the developer and maintained and 
rendered by the residents, home owners association or management 
companies / bodies of such estate. 

2.26 "Property" mea ns: 

(a) Immovable property registered in the name of a person/s, including, in the case 
of a sectional title scheme, a sectional title unit registered in the name of a 
person/s; 

(b) A right registered against immovable property in the name of a person/s, 
excluding a mortgage bond registered against the property; 

(c) A land tenure right registered in the name of a person/s or granted to a person/s 
in terms of legislation; or 


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(d) Public service infrastructure. 


2.27 "Public service infrastructure" means publicly controlled infrastructure of the 

following kinds: 

(a) National, provincial or other public roads on which goods, services or labour 
move across a municipal boundary; 

(b) Water or sewer pipes, ducts or other conduits, dams, water supply reservoirs, 
water treatment plants or water pumps forming part of a water or sewer scheme 
serving the public; 

(c) Power stations, power substations or power lines forming part of an electricity 
scheme serving the public; 

(d) Gas or liquid fuel plants or refineries or pipelines for gas or liquid fuels, forming 
part of a scheme for transporting such fuels; 

(e) Railway lines forming part of a national railway system; 

(f) Communication towers, masts, exchanges or lines forming part of a 
communications system serving the public; 

(g) Runways, aprons and the air traffic control unit at national or provincial airports, 
including the vacant land known as the obstacle free zone surrounding these, 
which must be vacant for air navigation purposes; 

(h) Breakwaters, sea walls, channels, basins, quay walls, jetties, roads, railway or 
infrastructure used forthe provision of water, lights, power, sewerage orsimilar 
services of ports, or navigational aids comprising lighthouses, radio navigational 
aids, buoys, beacons or any other device or system used to assist the safe and 
efficient navigation of vessels; 

(i) Any other publicly controlled infrastructure as may be prescribed; or 

(j) Rights of way, easements or servitudes in connection with infrastructure 
mentioned in sub-paragraphs (a) to (i) above. 


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2.28 "Public service purposes" in relation to the use of a property, means property owned 
and used by the state as - 

(a) Hospitals or clinics; 

(b) Schools, pre-schools, early childhood development centres or further 
education and training colleges; 

(c) National and provincial libraries and archives; 

(d) Police stations; 

(e) Correctional facilities; or 

(f) Courtsoflaw, 

but excludes property contemplated in the definition of "public service infrastructure". 

2.29 "Ratio" in relation to section 19 of the Act, means the relationship between the cent 
amount in the Rand applicable to residential properties and different categories of 
non-residential properties: 

2.30 "Residential property" means a property included in a valuation roll in terms of 
section 48(2)(b) of the Act in respect of which the primary use or permitted use is for 
residential purposes without derogating from section 9. For more clarity residential 
property in this policy will refer to improved property (structural improvements) that: 

(a) Is used predominantly for residential purposes including any adjoining property 
registered in the name of the same owner and used together with such 
residential property as if it were one property. Any such grouping shall be 
regarded as one residential property for rate rebate or valuation reduction 
purposes; 

(b) Is a unit registered in terms of the Sectional Title Act and used predominantly for 
residential purposes; 

(c) Is owned by a share-block company and used solely for residential purposes; 

(d) Is a residence used for residential purposes situated on property used for or that 
is related to educational purposes; 


Property Rates Policy 


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(e) Is property which is included as residential in a valuation roll in terms of section 
48(2)(b) of the Act; 

(f) Is retirement schemes and life right schemes used predominantly (60% or more) 
for residential purposes; 

(g) All residential properties with more than one use, irrespective of its zoning, will 
be multi purposed by the valuer to enable Council to levy the correct property 
rates levy on the intended use. 

2.31 "Rural communal settlements" means the residual portion of rural communal land 
excluding identifiable and rateable entities within the property and excluding State 
Trust Land and land reform beneficiaries as defined in the Act. 

2.32 "Sport property" means property (grass or other surfaces sport fields as well as 
clubhouses) predominantly used for amateur sporting activities. 

2.33 "State trust land" means land owned by the state: 

(a) In trust for persons communally inhabiting the land in terms of a traditional 
system of land tenure; 

(b) Over which land tenure rights were registered or granted; or 

(c) Which is earmarked for disposal in terms of the Restitution of Land Rights Act, 
No 22 of 1994. 

2.34 "Wind Farms" means an area of land with a group of energy-producing windmills or 
wind turbines. 

3. OBJECTIVES OF THE POLICY 

3.1 The objectives of this policy are: - 

(a) To comply with the provisions of section 3 of the Act; 

(b) To determine criteria to be applied for: 


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(i) Levying different property rates for different property or categories or sub- 
categories as determined in terms of section 8 of the Act; 

(ii) Exemptions; 

(iii) Reductions; 

(iv) Rebates; and 

(v) Rate increases or decreases; 

(c) To determine or provide criteria for the determination of: 

(i) Categories of properties or sub-categories for the purpose of levying 
different property rates; and 

(ii) Categories of owners of properties or categories of properties or sub- 
categoriesforthe purpose of grantingexemptions, rebates and reductions; 

(d) To determine how the Municipality's powers should be exercised in terms of 
multiple-used properties; 

(e) To identify and quantify the following for the Municipality in terms of cost and 
the benefit to the community: 

(i) Exemptions, rebates and reductions; 

(ii) Exclusions; and 

(iii) Rates on properties that must be phased in; 

(f) To take into account the effect of property rates on the poor; 

(g) To take into account the effect of property rates on organisations that perform 
activities for public benefit activities; 

(h) To take into account the effect of property rates on public services 
infrastructure; 

(i) To determine measures to promote local economic and social development; 


Property Rates Policy 


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(j) To identify all rateable revenue not being rated; and 

(k) In respect of agricultural property, give effect to the regulations promulgated in 
terms of section 83 and 19(l)(b) of the Act. 

3.2 It needs to be noted that Council has until the 2021/2022 financial year to fully comply 
with the implementation of section 8 of the Act. Section 8 deals with the application 
of differential rates on different categories or sub-categories of properties. 

4. POLICY PRIIMCIPLES 

4.1 Property rates are levied in accordance with the Act as an amount in the rand based 
on the market value of all rateable property contained in the Municipality's valuation 
roll and supplementary valuation roll. 

4.2 As allowed for in the Act, the municipality has chosen to differentiate between various 
categories of property and categories of owners of property as contemplated in 
paragraph 6 and 7 of this policy. Some categories of property and categories of owners 
are granted relief from rates. The Municipality however does not grant relief in respect 
of payments of property rates to any category of owners or properties, or to owners 
of properties on an individual basis. 

4.3 There shall be no phasing in of property rates based on the new valuation roll, except 
as prescribed by legislation and in accordance with paragraph 15 of this policy. 

4.4 In accordance with section 3(3) of the Act, the property rates policy for the 
Municipality is based on the following principles: 

(a) Equity 

The Municipality will treat all ratepayers with similar properties the same. 

(b) Affordability 

The ability of a person to pay rates will be taken into account by the Municipality. 
In dealing with the poor / indigent ratepayers the Municipality will provide relief 
measures through exemptions, reductions, rebates and cross subsidy from the 
equitable share allocation. 


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(C) 


Sustaina bility 


Rating of property will be implemented in a way that: 

(i) It supports sustainable local government by providing a stable and buoyant 
revenue source within the discretionary control of the Municipality; 

(ii) Supports local, social and economic development; and 

(iii) Secures the economic sustainability of every category of ratepayer. 

(d) Cost efficiency 

Property rates will be based on the value of all rateable property and will be used 
to fund community and subsidised services after taking into account any profits 
generated on trading services (water and electricity) as well as economic services 
(refuse removal and sanitation) and the amounts required to finance 
exemptions, rebates, reductions and phasing-in of rates as approved by the 
Municipality from time to time. 

5. CLASSIFICATION OF SERVICES 

5.1 The City Manager or his / her delegated official must, subject to the guidelines 
provided by National Treasury and the Municipal Council of the Municipality, through 
the Municipality's Tariff Policy make provision for the following classification of 
services: 

(a) Trading services 

(i) Water. 

(ii) Electricity. 

(b) Economic services 


(i) Refuse removal. 

(ii) Sanitation. 


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(c) Communityand subsidised services 


These include all those services ordinarily being rendered by the Municipality 
excluding those mentioned in subparagraph 5.1(a) and (b) above. 

5.2 Trading and economic services as referred to in paragraph 5.1(a) and (b) must be ring 
fenced and financed from service charges while community and subsidised services 
referred to in paragraph 5.1(c) will be financed from surpluses on trading and 
economic services, regulatory fees, rates and rates related income. 

6. CATEGORIES OF PROPERTY 

6.1 Subject to section 19 of the Act, Drakenstein Municipality may, in terms of the criteria 
set out in its property rates policy, levy different property rates for different categories 
of rateable properties, which may include categories determined according to: 

(a) The use of the property; 

(b) The permitted use of the property; 

(c) The geographical area in which the property is situated; or 

(d) A combination of (a) and (b) that will have to be phased in by the 2021/2022 
financial year. 

6.2 Categories of rateable property that may be determined in terms of paragraph 6.1 
above include the following: 

(a) Residential improved property; 

(b) Property that is vacant (empty stands) with zoning or proposed use earmarked 
for residential property; 

(c) Property that is vacant (empty stands) with zoning or proposed use earmarked 
for industrial, business or commercial; 

(d) Industrial property; 

(e) Business and commercial property; 


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(f) Farm property used for: 

(i) Agricultural purposes; 

(ii) Industrial purposes; 

(iii) Commercial or business purposes; 

(iv) Residential purposes; or 

(v) Purposes other than those specified in subparagraphs (i) to (iv); 

(g) Mining properties; 

(h) Farm property not used for any purpose; 

(i) Small holdings used for: 

(i) Agricultural purposes; 

(ii) Industrial purposes; 

(iii) Commercial or business purposes; 

(iv) Residential purposes; or 

(v) Purposes other than those specified in subparagraphs (i) to (iv); 

(j) Properties owned by an organ of state and used for public service purposes; 

(k) State owned property; 

(l) Municipal property; 

(m) Public service infrastructure as referred to in the Act; 

(n) Properties owned by public benefit organisations and used for specified public 
benefit activities; 


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(o) Property: 


(i) Acquired through the Provision of Land and Assistance Act, No 126 of 1993, 
or the Restitution of Land Rights Act, No 22 of 1994; or 

(ii) Which is subject to the Communal Property Associations Act, No 28 of 
1996; 

(p) Protected areas; 

(q) Property owned by the following public benefit organisations used for the 
corresponding public benefit activities listed in Part 1 of the Ninth Schedule to 
the Income Tax Act, No 58 of 1962 (also refer to paragraph 10.4 of this policy): 

(i) Welfare and humanitarian organisations; 

(ii) Cultural organisations; 

(iii) Sporting organisations; 

(iv) Conservation, environmental and animal welfare organisations; 

(v) Health care organisations; and 

(vi) Education and development; 

(r) Amateur sport property not listed in subparagraph (r)(iii) above; 

(s) Professional sport property; 

(t) Property used for multiple purpose, subject to section 9 of the Act; 

(u) Accommodation establishments: 

(i) In urban areas; and 

(ii) In rural (farm and small holding) areas; 

(v) Private open space; 


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(w) Conservation areas; 


(x) Property on which national monuments are proclaimed; 

(y) Privately owned towns; and 

(z) Any other category of property as may be determined by the Minister, with the 
concurrence of the Minister of Finance, by notice in the Gazette. 

6.3 In addition to the above categories of rateable property determines in terms of 
section 8(2) of the Act, a municipality may determine additional categories of rateable 
property, including vacant land: Provided that, with the exception of vacant land, the 
determination of such property categories does not circumvent the categories of 
rateable property that must be determined in terms of section 8(2) of the Act. 

6.4 Where a municipality can, on good cause, show that there is a need to sub-categorise 
the property categories listed in section 8(2) of the Act, a municipality may apply to 
the Minister in writing for authorisation to create one or more of such sub categories. 

6.5 The above provisions must be applied within seven years from 1 July 2015 in terms of 
section 93B of the Act. 

6.6 In determining the category or sub-category of a property referred to in paragraph 6.2 
above the Municipality shall take into consideration the dominant use of the property, 
regardless the formal zoning of the property. 

6.7 Properties used for multiple purposes shall be categorised and rated as provided for in 
section 9 of the Act and as more fully described in paragraph 8 of this policy. 

7. CATEGORIES OF OWNERS 

7.1 For the purpose of granting exemptions, reductions and rebates in terms of 
paragraph 10,11 and 12 of this policy the following categories of owners of properties 
shall be determined:- 

(a) Those owners who qualify and who are registered as indigents in terms of the 
adopted indigent policy of the Municipality; 


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(b) Those owners who do not qualify as indigents in terms of the adopted indigent 
policy of the Municipality but whose total monthly income is less than an amount 
annually determined by the Municipality in its budget; 

(c) Owners of property situated within an area affected by: 

(i) A disaster within the meaning of the Disaster Management Act, No 57 of 
2002;or 

(ii) Serious adverse social or economic conditions; 

(d) Owners of residential properties with a market value below the amount as 
determined annually by the Municipality in its budget; 

(e) Owners of properties situated in "privately owned towns" as referred to in 
paragraph 12.1.2 of this policy; 

(f) Owners of agricultural properties as referred to in paragraph 12.1.3 and 12.1.4; 
and 

(g) Child headed families where any child of the owner or child who is a blood 
relative of the owner of the property, is responsible for the care of siblings or 
parents of the household. 

(h) Owners of business, commercial and industrial properties as referred to in 
paragraph 12.1.1 of this policy. 

8. MULTI PURPOSE USE OF PROPERTIES 

8.1 Properties used for multiple purposes which for example do not fall within the 
definition of residential properties and, accordingly, do not qualify for the residential 
rate, may be included into the category of multiple-use properties, as per 
section 9(l)(c) of the Act, for which an apportionment of value for each distinct use of 
the property, irrespective of its zoning rights, will be calculated by the municipal valuer 
and used for billing at the appropriate and applicable rate. 

8.2 All properties in Drakenstein Municipality with more than one use, irrespective of its 
zoning rights, will be multiple purposed by the municipal valuer. 


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9. 


DIFFERENTIAL RATING 


9.1 Criteria for differential rating on different categories of properties in terms of 

section 8(1) of the Act will be according to: 

(a) The nature of the property including its sensitivity to rating e.g. agricultural 
properties used for agricultural purposes; and 

(b) The promotion of local, social and economic development within the 
Municipality. 

9.2 Differential rating among the various property categories will be done by way of: 

(a) Setting a different cent amount in the rand for each property category or sub- 
category; and 

(b) By way of reductions and rebates as provided for in this policy document. 

10. EXEMPTIONS AND IMPERMISSIBLE RATES 

10.1 The following categories of property are exempted from rates:- 

(a) Municipal properties 

Municipal properties are exempted from paying property rates as it will increase 
the rates burden or service charges to property owners or consumers. However, 
where municipal properties are leased, the lessee will be responsible for the 
payment of the determined property rates in accordance with the lease 
agreement. 

(b) Residential properties 

All residential properties with a market value of less than the amount as annually 
determined by the municipality are exempted from paying property rates. From 
the 2019/2020 financial year the maximum reduction is determined as 
R 180,000. The impermissible rates of R 15,000 contemplated in terms of 
section 17(l)(h) of the Act is included in the amount referred to above as 
annually determined by the municipality. The remaining R 165,000 is an 
important part of the council's indigent policy and is aimed primarily at 
alleviating poverty. 


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(c) Private Open Spaces 


All private open spaces are exempted from the levying of rates. 

(d) Public benefit organisations (PBO's) 

(i) Taking into account the effects of property rates on PBO's performing a 
specific public benefit activity and if registered in_terms of Part 1 of the 
Ninth Schedule to the Income Tax Act, No 58 of 1962, for tax reduction 
because of those activities, PBO's may apply for the exemption of paying 
property rates. PBO's may include, inter alia\- 

(aa) Welfare and humanitarian (charitable) organisations; 

(bb) Cultural organisations (museums, libraries, art galleries and botanical 
gardens); 

(cc) Sporting organisations (non-professional); 

(dd) Conservation, environmental and animal welfare organisations; 

(ee) Health care organisations; and 
(ff) Education and development. 

(ii) All possible benefiting organisations in paragraph 10.4 must apply initially 
for exemptions. All applications must be addressed in writing to the 
Municipality by 31 August for the financial year in respect of which the rate 
is levied for the first time. If the exemption applied for is granted the 
exemption will apply for the full financial year till there is a usage or 
ownership change. 

(iii) Public benefit organisations must attach a SARS tax exemption certificate 
issued by the South African Revenue Services (SARS) as contemplated in 
Part 1 of the Ninth Schedule of the Income Tax Act, 1962 (No 58 of 1962) 
to all applications. 

(iv) The Municipality retains the right to refuse the exemption if the details 
supplied in the application form were incomplete, incorrect or false. 


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(v) The extent of the exemptions implemented in terms of paragraph 10.1 to 
10.4 must annually be determined by the municipality and included in the 
annual budget. 

(vi) Exemptions in paragraph 10.1, 10.2 and 10.3 will automatically apply and 
no application is thus required. Exemptions in terms of paragraph 10.4 
require an initial application where after it will be applied automatically. 

11. REDUCTIONS 

11.1 Reductions as contemplated in section 15 of the Act will be considered on an ad hoc 

basis in the event of the following: 

(a) Partial or total destruction of a property; and 

(b) Disasters as defined in the Disaster Management Act, No 57 of 2002. 

11.2 The following conditions shall be applicable in respect of paragraph 11.1: 

(a) The owner referred to in clause ll.l(a) shall apply in writing for a reduction and 
the onus will rest on such applicant to prove to the satisfaction of the 
Municipality that the property has been totally or partially destroyed. He / she 
will also have to indicate to what extent the property can still be used and the 
impact on the value of the property. The reduction in property rates will only be 
considered after the municipality has been supplied with a demolition certificate, 
demolition invoice or proof of destruction e.g. fire brigade report, photos etc. 

(b) Property owners will only qualify for a reduction if affected by a disaster as 
referred to in the Disaster Management Act, No 57 of 2002. 

(c) A maximum reduction that may be determined on an annual basis shall be 
allowed in respect of both clauses ll.l(a) and ll.l(b). From the 2019/2020 
financial year the maximum reduction is determined as 80% and remains the 
same until re-determined by Council. 

(d) An ad-hoc reduction as stipulated in paragraph 11.1 a and b will not be given for 
a period in excess of 3 months, unless the Municipality gives further extension 
on application. 


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(e) If property rates were paid in advance prior to granting of a reduction the 
Municipality will give credit to such an owner as from the date of reduction until 
the date of lapse of the reduction or the end of the period for which payment 
was made whichever occurs first. 

12. REBATES 

12.1. Categories of property 

12.1.1 Business, commercial and industrial properties 

(a) The municipality may grant rebates to rateable enterprises that promote local, 
social and economic development in its area of jurisdiction. The following criteria 
will apply: 

(i) Job creation in the municipal area; 

(ii) Social upliftment of the local community; and 

(iii) Creation of infrastructure for the benefit of the community; 

(b) A maximum rebate as annually determined by the Municipality will be granted 
on approval, subject to: 

(i) A business plan issued by the directors of the company indicating how the 
local, social and economic development objectives of the municipality are 
going to be met; 

(ii) A continuation plan issued by the directors and certified by auditors of the 
company stating that the objectives have been met in the first year after 
establishment and how the company plan to continue to meet the 
objectives; and 

(iii) An assessment by the Municipal Manager or his / her nominee indicating 
that the company qualifies; and 

(c) All applications must be addressed in writing to the municipality for the financial 
year in respect of which the property rates is levied. If the rebate applied for is 
granted the rebate will apply from the date of receipt of the application. 


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(d) The maximum rebate determined for qualifying businesses will be determined in 
terms of the approved Investment Incentive Policy for the 2019/2020 financial 
year and onwards. 

12.1.2 Privately owned towns serviced by the owner 

(a) The Municipality grants an additional rebate, to be determined on an annual 
basis, which applies to privately owned towns serviced by the owner qualifying 
as defined in paragraph 2.17 of this policy. 

(b) An additional rebate (based on the total property value) of a maximum of 15% 
will be granted by the municipality in respect of the following: 

(i) 5% if the owner maintains all rates-related services as defined in 
paragraph 2.17 of this policy; 

(ii) 5% if the owner renders a full refuse removal service; and 

(iii) 5%_if the owner renders a full sanitation service. 

The category Privately Owned Towns is to be phased out by the 2021/2022 financial 

year due the amendment in section 8 of the Municipal Property Act, No 6 of 2004. 

(c) The granting of additional rebates is subject to the following: 

(i) All applications must be addressed in writing to the Municipality indicating 
how service delivery and development obligations of the Municipality were 
met. This application will be required as a once off requirement. Any new 
applications for the 2019/2020 financial year and onwards must be 
addressed in writing to the municipality for the financial year in respect of 
which the rate is levied. If the rebate applied for is granted the rebate will 
apply from the date of receipt of such application again regarded as a once 
off requirement. Home owners associations or management companies / 
body corporates of "privately owned towns" may apply as a collective for 
the additional rebates. These rebates are over and above the R 180,000 
exemption on residential properties referred to in paragraph 10.2 of this 
policy. 

(ii) Council reserves the right to send officials or its agents to premises 
/ households receiving relief on annual basisforthe purpose of conducting 


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an on-site audit of the details supplied. The onus also rests on recipients 
to immediately notify Council of any changes in their original application. 

(iii) The Municipality retains the right to refuse the exemption if the details 
supplied in the application form were incomplete, incorrect or false. 

(d) The rebate of 16.8% will not be applicable on any sport property within privately 
owned towns. Sport property used for amateur or professional purposes will be 
dealt with as per paragraph 12.2.5 and 12.2.6 below. 

12.1.3 Agricultural property rebate 

(a) When considering the criteria to be applied in respect of any exemptions, 
rebates and reductions on any properties used for agricultural purposes the 
Municipality must take into account: 

(i) The extent of rates related services rendered by the Municipality in respect 
of such properties; 

(ii) The contribution of agriculture to the local economy; 

(iii) The extent to which agriculture assists in meeting the service delivery and 
developmental objectives of the Municipality; and 

(iv) The contribution of agriculture to the social and economic welfare of farm 
workers. 

(b) In terms of section 84 of the Act the Minister for Provincial and Local 
Government, and in concurrence with the Minister of Finance as required 
through section 19 of the Act, may determine that a rate levied by the Council 
on a category of non-residential property may not exceed the ratio to the rate 
on residential property. In the absence of any such promulgation the 
municipality will apply the standard ratio for agricultural properties as 1:0.25 
(75% "rebate" on the tariff for residential properties). Since the 2009/2010 
financial year the minister has promulgated a ratio of 1:0.25. 

(c) An additional rebate (based on the total property value) of a maximum of 10% 
will be granted by the municipality in respect of the following: 

(i) 2.5%forthe provision of accommodation in a permanent structure tofarm 


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workers and their dependents or families; 


(ii) 2.5% if these residential properties are provided with potable water; 

(iii) 2.5% if the residential properties of the farm workers are electrified; and 

(iv) 2.5% for the provision of land for burial of own farm workers or for 
educational and / or recreational purposes to own farm workers as well as 
for workers from surrounding farms. 

(e) The granting of additional rebates is subject to the following: 

(i) All applications must be addressed in writingto the Municipality indicating 
how service delivery and development obligations of the Municipality and 
contribution to the social and economic welfare of farm workers were 
met. If the rebate applied for is granted the rebate will apply from the date 
of receipt of such application and will be regarded as a once off 
requirement. 

(ii) Council reserves the right to send officials or its agents to premises/ 
households receiving relief on annual basis for the purpose of conducting 
an on-site audit of the details supplied. The onus also rests on recipients 
to immediately notify Council of any changes in their original application. 

(iii) The Municipality retains the right to refuse the exemption if the details 
supplied in the application form were incomplete, incorrect or false. 

(e) No other rebates will be granted to properties that qualify for the agricultural 
rebate. For the avoidance of doubt, properties that qualify for the agricultural 
rebate will not be entitled to the residential rate exemption as set out in 
paragraph 10.2 of this policy. 

12.1.4 Small Holdings in rural areas 

(a) The Municipality grants an additional rebate, to be determined on an annual 
basis, which applies to residential properties on farms, small holdings and in rural 
areas serviced by the owner. 

(b) An additional rebate (based on the total property value) of a maximum of 22.5% 
will be granted by the municipality in respect of the following: 


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(i) 7.5% if the owner renders a full water service; 


(ii) 7.5% if the owner renders a full refuse removal service; and 

(iii) 7.5% if the owner renders a full sanitation service. 

The rebate percentage has been left unchanged, the municipality will apply to the MEC 
in terms of section 8(4)(a) of the Municipal Property Rates Act No.6 of 2004 as 
amended to add small holdings in rural areas as a sub category under the residential 
category. 

(c) An additional rebate for disabled persons (based on the total property value) of 

a maximum of 7.5% will be granted by the municipality in respect of the 

following: 

(i) 2.5% if the owner renders a full water service; 

(ii) 2.5% if the owner renders a full refuse removal service: and 

(iii) 2.5% if the owner renders a full sanitation service. 

(d) The granting of additional rebates is subject to the following: 

(i) All applications must be addressed in writing to the Municipality indicating 
how service delivery and development obligations of the Municipality were 
met. This application will be required as a once off requirement. Any new 
applications for the 2019/2020 financial year and onwards must be 
addressed in writing to the municipality for the financial year in respect of 
which the rate is levied. If the rebate applied for is granted, the rebate will 
apply from the date of receipt of such application again and will be 
regarded as a once off requirement. These rebates are over and above the 
R180,000-exemption on residential properties referred to in paragraph 10.2 
of this policy. 

(ii) Council reserves the right to send officials or its agents to 
premises/households receiving relief on annual basis for the purpose of 
conducting an on-site audit of the details supplied. The onus also rests on 
recipients to immediately notify Council of any changes in their original 
application. 


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(iii) The Municipality retains the right to refuse the exemption if the details 
supplied in the application form were incomplete, incorrect or false. 

12.2 Categories of owners 

12.2.1 Indigent owners 

(a) Owners who qualify and who are registered as indigents in terms of the adopted 
indigent policy of the Municipality, regardless of the value of the property, may 
will receive a 100% rebate of up to a property value of R500.000 from payment 
of property rates. 

(b) An indigent household who stays on a property of a deceased owner / relative 
can apply for such rebate from payment of property rates while the process of 
transferring of ownership takes place. 

12.2.2 Child headed families 


(a) Families headed by children shall receive a 100% rebate from paying property 
rates, according to monthly household income, subject to the provisions listed 
below. To qualify for this rebate the head of the family must: 

(i) Occupy the property as his / her normal residence; 

(ii) Not be older than 18 years of age; 

(iii) Still be a scholar or jobless; and 

(iv) Be in receipt of a total monthly income from all social grant resources not 
exceeding an amount to be determined annually by the Municipality. For 
the 2019/2020 financial year starting at 01 July 2019 this amount is 
determined as two times the social grant (Rl,780 x 2) = R3,560 as per the 
2019 budget speech by the Minister of Finance) paid by National 
Government plus 25% (R3,560 + R890) = R4,450 per month. 

(b) The family head must apply on the prescribed application form for registration 
as a child headed household and must be assisted by the Municipality with 
completion of the application form. If qualifying, this rebate will automatically 
apply and no further application is thus required. 


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12.2.3 R e tir e d and disab le d p e rsons Households eligible for financial assistance 


(a) R e tir e d and disab le d p e rsons, Households eligible for financial assistance 
r e gist e r e d as indig e nts , qualify for sp e ci al rebates according to monthly 
household income. To qualify for the rebate a property owner must: 

(i) Occupy the property as his / her normal residence; 

(ii) B e at le ast 60 y e ars of ag e or in r e c e ipt of a disabi l ity p e nsion. 

(iii) Be in receipt of a total monthly household income from all sources as 
annually determined by the Municipality ( inc l uding incom e of spous e s of 
own e r ); 

(iv) If you are the owner of more than one property, the rebate will only be 
granted for the property that is occupied by the applicant; and 

(v) Provided that where the owner is unable to occupy the property due to no 
fault of his/her own, the spouse or minor children may satisfy the 
occupancy requirement. 

(b) Property owners must apply on the prescribed application form for a rebate as 
determined by the Municipality. Applications must be accompanied by: 

(i) A certified copy of the identity document or any other proof of the owner's 
age which is acceptable to the Municipality; 

(ii) Sufficient proof of income of the owner and his / her spouse; 

(iii) An affidavit from the owner; 

(iv) If the owner is a disabled person proof of a disability pension payable by 
the state must be supplied; and 

(v) If the owner has retired at an earlier stage for medical reasons proof 
thereof must be submitted. 

(c) All applications must be addressed in writing to the Municipality for the financial 
year in respect of which the rate is levied. If the rebate applied for is granted the 


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rebate will apply from the date of receipt of the application. For the 2019/2020 
financial year the total monthly income and corresponding rebate is determined 
as follows: 

(i) Category A : R 0 to R4,450 per month -100% of indigent support; 

(ii) Category B : R4,451 to R4,950 per month - 80% of indigent support; 

(iii) Category C : R4,951 to R6,200 per month - 50% of indigent support; and 

(iv) Category D : R6,201 to R6,500 per month - 20% of indigent support. 

(d) The Municipality retains the right to refuse the rebates if the details supplied in 
the application form were incomplete, incorrect or false. 

12.2.4 Retired persons seventy (70) years and older 

(a) Retired persons seventy years and older, who do not qualify for any other rebates 
as per the Category of Properties (Paragraph 12.1 of this Policy) or Category of 
Owners (Paragraph 12.2 of this Policy), qualify for special rebates according to 
their pensioner and age status. To qualify for the rebate a property owner must: 

(i) Occupy the property as his / her normal residence; 

(ii) Be at least 70 years of age as the breadwinner; 

(iii) Be in receipt of a monthly pension as the only source of income except 
that interest on investments will be allowed and must be declared that 
may not exceed 25% of the pension income; and 

(iv) Not be the owner of more than one property in Drakenstein. 

(b) Property owners must apply on the prescribed application form for a rebate as 
determined by the Municipality. Applications must be accompanied by: 

(i) A certified copy of the identity document or any other proof of the owner's 
age which is acceptable to the Municipality; 

(ii) Sufficient proof of income of the owner and his / her spouse; and 


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32 









(iii) An affidavit from the owner. 


(c) All applications must be addressed in writing to the Municipality for the financial 
year in respect of which the rate is levied. Any new applications for the 
2019 /2020 financial year and onwards must be addressed in writing to the 
municipality for the financial year in respect of which the rate is levied. If the 
rebate applied for is granted the rebate will apply from the date of receipt of 
such application and will be regarded as a once off requirement. These rebates 
are over and above the R180,000 exemption on residential properties referred 
to in paragraph 10.2 of this policy. 

(d) An additional rebate (based on the total property value) of a maximum of 10 % 
will be granted by the Municipality for the 2019/2020 financial year. 

(e) The Municipality retains the right to refuse the rebates if the details supplied in 
the application form were incomplete, incorrect or false. 

12.2.5 State-owned properties 

The Municipality shall grant a 20% rebate on the property rates levied for state-owned 

properties. 

12.2.6 Amateur sporting organisations 

(a) The Municipality shall grant a rebate of 75% on the property rates levied for sport 
fields with grass or any other surfaces owned by amateur sporting organisations. 
This will also be applicable on sport fields located in privately owned towns. 

(b) The Municipality shall grant a rebate of 25% on the property rates levied for the 
clubhouse, restaurant and other facilities associated with the sporting activities. 
This will also be applicable to similar facilities associated with sporting activities 
in privately owned towns. 

12.2.7 Professional sporting organisations 

(a) The Municipality may, on application by a professional sporting organisation, 
grant a rebate on the property rates levied on property owned by professional 
sporting organisations. 


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(b) Such an application must be accompanied with the latest audited set of financial 
statements and the audit report issued in terms of the South African Accounting 
Standards. 

(c) For the 2019/2020 financial year a maximum rebate of 10% on property rates 
levied is determined, subject to Council's approval of the application submitted 
by the professional sporting organisation. 

12.3 The extent of the rebates granted in terms of paragraphs 12.1 and 12.2 must annually 

be determined by the Municipality and included in the annual budget. 

13. IMPERMISSIBLE RATES 

13.1 In terms of section 17(1) of the Act the Municipality may, inter alia, not levy a rate: 

(a) On any property referred to in paragraphs (a), (b), (e), (g) and (h) of the definition 
of 'public service infrastructure'. 

(b) On those parts of a special nature reserve, national park or nature reserve within 
the meaning of the National Environmental Management: Protected Areas Act, 
No 57 of 2003, or of a national botanical garden within the meaning of the 
National Environmental Management: Biodiversity Act, 2004, which are not 
developed or used for commercial, business, or residential agricultural purposes; 

(c) On mining rights or a mining permit within the meaning of the Mineral and 
Petroleum Resource Development Act, 2002 (Act No. 28 of 2002), excluding any 
building, other immovable structures and infrastructure above the surface of the 
mining property required for the purposes of mining; 

(d) On a property belonging to a land reform beneficiary or his or her heirs, 
dependants or spouse provided that this exclusion lapses ten years from the date 
on which such beneficiary's title was registered in the office of the Registrar of 
Deeds or upon alienation of the property by the land reform beneficiary or his or 
heirs, dependants or spouse; and 

(e) On a property registered in the name of and used primarily as a place of public 
worship by a religious community, including the official residence registered in 
the name of that community which is occupied by the office-bearer of that 
community who officiates at services at that place of worship. 


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14. 


PAYMENT OF RATES 


14.1 The property rates levied on properties shall be payable: 

(a) On a monthly basis; or 

(b) Annually, before 15 October each year. 

14.2 Ratepayers may choose paying rates annually in one instalment on or before 
15 October each year. If the owner of property that is subject to property rates, notify 
the Municipal Manager or his / her nominee in writing by not later than 30 June in any 
financial year, or such later date in such financial year as may be determined by the 
Municipality that he / she wishes to pay all rates annually, such owner shall be entitled 
to pay all properties rates in the subsequent financial year and each subsequent 
financial year annually until such notice is withdrawn by him / her in a similar manner. 

14.3 The Municipality shall determine the due dates for payments in monthly instalments 
and the single annual payment and this date shall appear on the accounts forwarded 
to the owner / tenant / occupants / agent. 

14.4 Rates payable on an annual basis will be subject to a discount of 5% if paid in full on or 
before 15 August of each year. The owner shall apply for such discount. 

14.5 Interest on arrear property rates, whether payable on or before 15 October or in equal 
monthly instalments, shall be calculated in accordance with the provisions of the credit 
control and debt collection policy of the Municipality. 

14.6 If a property owner who is responsible for the payment of property rates in terms of 
this policy fails to pay such rates in the prescribed manner, it will be recovered from 
him / her in accordance with the provisions of the credit control and debt collection 
by-law of the Municipality. 

14.7 Arrears rates shall be recovered from tenants, occupiers and agents of the owner, in 
terms of section 28 and 29 of the Act and the Municipality's credit control and debt 
collection by-law. 

14.8 Where the property rates levied on a particular property have been incorrectly 
determined, whether because of an error or omission on the part of the Municipality 
or false information provided by the property owner concerned or a contravention of 
the permitted use to which the property concerned may be put, the property rates 


Property Rates Policy 


35 




payable shall be appropriately adjusted for the period extending from the date on 
which the error or omission is detected back to the date on which property rates were 
first levied in terms of the current valuation roll. 

14.9 In addition, where the error occurred because of false information provided by the 
property owner or as a result of a contravention of the permitted use of the property 
concerned, interest on the unpaid portion of the adjusted property rates payable shall 
be levied at the maximum rate permitted by prevailing legislation. 

15. ACCOUIMTS TO BE FURNISHED 

15.1 The Municipality will furnish each person liable for the payment of property rates with 
a written account, which will specify: 

(a) The amount due for property rates payable; 

(b) The date on or before which the amount is payable; 

(c) How the amount was calculated; 

(d) The market value of the property, and 

(e) Rebates, exemptions, reductions or phasing-in, if applicable. 

15.2 A person liable for the payment of property rates must furnish the municipality with 
an address where correspondence can be directed to. 

15.3 A person liable for payment of property rates remains liable for such payment, 
whether or not such person has received a written account from the municipality. If 
the person concerned has not received a written account, he/she must make the 
necessary enquiries with the Municipality. 

15.4 In the case of joint ownership the Municipality shall consistently, in order to minimise 
costs and unnecessary administration, recover rates from one of the joint owners only 
provided that it takes place with the consent of the owners concerned. 

15.5 When an owner's rates account is in arrears for longer than 90 (ninety) days, then the 
Municipality may initiate the proceedings as described in Sections 28 or 29 of the 
MPRA. A notice to this effect will be forwarded to the tenant, occupier or agent 
providing the required legal information regarding their payments to the owner, which 


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36 




are to be redirected to the municipality so as to cover the arrear rates account. A notice 
will be forwarded to the owner in question to indicate the legal proceedings and the 
actions that the municipality has initiated. 

16. RATES CLEARANCE CERTIFICATES 

16.1 The municipality shall issue a rates clearance certificate in terms of Section 118(1) of 
the Local Government: Municipal Systems Act 2000 (Act no 32 of 2000), after payment 
of the subscribed administration fee, and once the rates and services is paid 2 months 
(60 days) in advance in order to facilitate the transfer of immovable property. 

16.2 Rates clearance certificates has a validity of 60 days from the date it has been issued, 
in terms of Section 118(1) (b) of the Local Government: Municipal Systems Act 2000 
(Act no 32 of 2000). 

16.3 All debt is deemed to be collectable by the municipality in terms of Section 118(3) of 
the Systems Act. The municipality retains the right to collect debt from a previous 
owner despite the issuance of a clearance certificate or registration of the transfer of 
the property in the name of a new owner. After registration of the transfer the 
outstanding debt of the previous owner may not be collected from the new owner. 

16.4 No interest shall be paid by the municipality to the registered seller in respect of these 
payments which are deemed to be due. 

16.5 According to Section 102 of the Systems Act (Act 32 of 2000), a Municipality may: 

(a) Consolidate any separate accounts of persons liable for payments to the 
municipality; 

(b) Credit a payment by such a person against any accounts/s of that person; and 

(c) Implement any of the debt collection and credit control measures to any arrears 
on any account/s of that person. 

16.6 All credit amounts will firstly be allocated as per above 

17. CREDIT REFUNDS 

17.1 All payments will be allocated to the registered seller's municipal account. 

17.2 All refunds will be made according to the conveyancer's instruction. 


Property Rates Policy 


37 




17.3 Refunds will only be issued on written request or an application for refund by the 
conveyancer. 

17.4 For cost benefit purposes only refunds above an amount of R300.00 will be refunded 
as perthe above criteria. 

18 PHASING IN OF RATES 

18.1 The property rates to be levied on newly rateable property shall be phased in as 
explicitly provided for in section 21 of the Act. 

18.2 The phasing-in discount on the properties referred to in section 21 shall be as follows:- 


(a) 

First year 

: 75% of the relevant rate; 



(b) 

Second year 

: 50% of the relevant rate; and 



(c) 

Third year 

: 25% of the relevant rate. 



No property rates on newly rateable properties that are owned and used by 
organisations conducting activities that are beneficial to the public and that are 
registered in terms of the Income Tax Act for those activities, shall be payable during 
the first year. The phasing-in discount on these properties shall be as indicated below: 

(a) 

First year 

: 100% of the relevant rate; 



(b) 

Second year 

: 75% of the relevant rate; 



(c) 

Third year 

: 50% of the relevant rate; and 



(d) 

Fourth year 

: 25% of the relevant rate. 




19. SPECIAL RATING AREAS 

19.1 The municipality will, whenever deemed necessary, by means of a formal Council 
resolution determine special rating areas in consultation with the relevant 
communities as provided for in section 22 of the Act. 

19.2 The following matters shall be attended to in consultation with the committee referred 
to in paragraph 16.3 whenever special rating is being considered: 


Property Rates Policy 


38 




(a) Prosed boundaries of the special rating area; 

(b) Statistical data of the area concerned giving a comprehensive picture of the 
number of erven with its zoning, services being rendered and detail of services 
such as capacity, number of vacant erven and services that are not rendered; 

(c) Proposed improvements clearly indicating the estimated costs of each individual 
improvement; 

(d) Proposed financing of the improvements or projects; 

(e) Priority of projects if more than one; 

(f) Social economic factors of the relevant community; 

(g) Different categories or sub-categories of property; 

(h) The amount of the proposed special rating; 

(i) Details regarding the implementation of the special rating; and 

(j) The additional income that will be generated by means of this special rating. 

19.3 A committee consisting of 6 members of the community residing within the area 
affected will be established to advise and consult the Municipality in regard to the 
proposed special rating referred to above. This committee will be elected by the 
inhabitants of the area concerned who are 18 years of age or older. No person under 
the age of 18 may be elected to serve on the committee. The election of the committee 
will happen under the guidance of the Municipal Manager. The committee will serve 
in an advisory capacity only and will have no decisive powers. 

19.4 The required consent of the relevant community shall be obtained in writing or by 
means of a formal voting process under the chairmanship of the Municipal Manager. 
A majority shall be regarded as 50% plus one of the households affected. Each relevant 
household within the special rating area, i.e. every receiver of a monthly municipal 
account, will have 1 vote only. 

19.5 In determining the special additional rates the Municipality shall differentiate between 
different categories as referred to in paragraph 6 of this policy. 


Property Rates Policy 


39 




19.6 The additional property rates levied shall be utilised for the purpose of improving or 
upgrading of the specific area only and not for any other purposes whatsoever. 

19.7 The Municipality shall establish separate accounting and other record-keeping systems 
for the identified area and the households concerned shall be kept informed of 
progress with projects and financial implications on an annual basis. 

20. FREQUENCY OF VALUATION 

20.1 The Municipality shall prepare a new valuation roll at least every 4 (four) years. 

20.2 In accordance with the Act the Municipality, under exceptional circumstances, may 
request the MEC for Local Government and Housing in the province to extend the 
validity of the valuation roll to 5 (five) years. 

20.3 Supplementary valuations may be done on a continual basis but at least published 
once an annual basis in terms section 78 of the Municipal Property Rates Act 6 of 20014 
as amended by Act 29 of 2014. 

20.4 In the event that a property has been transferred to a new owner and rates emanating 
from a supplementary valuation become due and payable, the new owner will be held 
responsible from the date of registration. 

21. OBJECTION AND APPEALS 

21.1 Any person may lodge an objection to a valuation subject to Section 50 of the MPRA 
but within the period stated in the notice referred to in Section 49(l)(a) of the MPRA. 

21.2 An appeal to an appeal board against a decision of a municipal valuer in terms of 
section 51 of the MPRA may be lodged in the prescribed manner subject to Section 54 
of the MPRA. The appeal must be lodged (as a guideline), within a period of 30 days 
nonetheless, as set out in Section 54(2) of the MPRA. 

21.3 The administrative actions or processes as described in the MPRA for the handling of 
objections or appeals will be the basis that the Municipality will follow. 


Property Rates Policy 


40 




21.4 The lodging of an objection or appeal: 


(a) In terms of Section 50 of the MPRA does not defer liability for the payment of 
rates in terms of this Policy; or 

(b) In terms of Section 54 of the MPRA does not defer liability for the payment of 
rates in terms of this Policy. 

22. COMMUNITY PARTICIPATION 

22.1 Before the Municipality adopts the property rates policy, the Municipal Manager will 

follow the process of community participation as envisaged in chapter4 of the 

Municipal Systems Act and comply with the following requirements: 

(a) Council must establish appropriate mechanisms, processes and procedures to 
enable the local community to participate and will, if needed, provide for 
consultative sessions with locally recognised community organisations and 
where appropriate traditional authorities; 

(b) Conspicuously display the draft property rates policy for a period of at least 
30 days at the Municipality's head and satellite offices, libraries and on the 
website; 

(c) Advertise in the media a notice stating that the draft property rates policy has 
been prepared for submission to Council and that such policy is available at the 
various municipal offices and on the website for public inspection; 

(d) Property owners and interest persons may obtain a copy of the draft property 
rates policy from the municipal offices during office hours at a fee as determined 
by Council as part of its annual tariffs. Property owners and interest persons are 
invited to submit written comments or representations to the Municipality 
within the specified period in the notice; 

(e) Council will consider all comments and/or representations received when 
considering the finalisation of the property rates policy; and 

(f) The municipality will communicate the outcomes of the consultation process in 
accordance with section 17(2)(e) of the Municipal Systems Act, No 32 of 2000. 


Property Rates Policy 


41 




23. 


REGISTER OF PROPERTIES 


23.1 The Municipality will compile and maintain a register in respect of all properties 
situated within the jurisdiction of the Municipality. The register will be divided into 
Part A and Part B. 

23.2 Part A of the register will consist of the current valuation roll of the municipality and 
will include all supplementary valuations done from time to time. 

23.3 Part B of the register will specify which properties on the valuation roll or any 
supplementary valuation roll are subject to: 

(a) Exemption from rates in terms of section 15 of the Act; 

(b) Rebate or reduction in terms of section 15 of the Act; 

(c) Phasing-in of rates in terms of section 21 of the Act; and 

(d) Exclusions as referred to in section 17 of the Act. 

23.4 The register will be open for inspection by the public at the municipal main offices 
during office hours or on the website of the Municipality. 

23.5 The Municipality will update Part A of the register during the supplementary valuation 
process. 

23.6 Part B of the register will be updated on an annual basis as part of the implementation 
of the municipality's annual budget. 

24. BY-LAWS TO GIVE EFFECT TO THE PROPERTY RATES POLICY 

24.1 The municipality will adopt a Property Rates By-law to give effect to the 
implementation of the Property Rates Policy and such By-law may differentiate 
between different categories of properties and different categories of owners of 
properties liable for the payment of property rates. 


Property Rates Policy 


42 




25. REGULAR REVIEW PROCESSES 

25.1 The property rates policy must be reviewed on an annual basis to ensure that it 
complies with the Municipality's strategic objectives as contained in the Integrated 
Development Plan and current legislation. 

26. SHORT TITLE 

26.1 This policy is the Property Rates Policy of the Drakenstein Municipality. 


Property Rates Policy 


43 





DRAKENSTEIN 

MUNISIPALITEIT • MUNICIPALITY • UMASIPALA 
Paarl | Wellington | Gouda I Saron | Simondium 


Asset Transfer Policy 


www.drakenstein.gov.za 


A city of excellence 





Contents 


1. Definitions 

CHAPTER 1: GENERAL PROVISIONS 

2. Application 

3. Legislative framework 

4. Objectives and principles 

5. Powers of the municipality 
CHAPTER 2: DISPOSAL MANAGEMENT 

6. Disposal management system 

7. Public auction 

8. Competitive bidding 

9 -. - Committ ee syst e m for comp e titiv e bidding 

940. Closed bidding 
104. Call for applications 
114. Call for proposals 

12. Release of immovable assets for restitution purposes 

13. Disposal by direct negotiation 

13.1 Non-viable property 

13.2 Viable property 

14. Social care, community or sport assets 

15. Places of worship 

16. Selling prices 

17. Plight of the poor 

18. Standard c €onditions of sale 

19. Property not for disposal 

20 Exempted disposals to organs of state 

21. Non-exempted disposals 

CHAPTER 3: GRANTING OF RIGHTS TO USE, CONTROL OR MANAGE MUNICIPAL CAPITAL 
ASSETS 

22. Property rights 

23. Subsidised r e nta l rates 

24. Decision making process for granting of rights to use, control or manage municipal 
capital assets 

25. Standard c Gonditions of lease 

26. Short term leases 

27. Projections, projecting structures, encroachments and other minor rights to use 

CHAPTER 4: MANAGEMENT AND DISPOSAL OF MOVABLE ASSETS 

28. General principles 

29. Disposal 


2 









30. Methods of disposal 

31. Administration 

32. Conditions of disposal 

33. General conditions for disposal via tender or auction 

34. General conditions for disposal via written price quotation 

35. General conditions for disposal via donation 


3 



1. DEFINITIONS 


For purposes of this policy, unless otherwise stated, the following definitions shall 

apply: 

"capital asset" 

(a) any immovable asset such as land, property or buildings; or 

(b) any movable asset that can be used continuously or repeatedly for more than one 
year in the production or supply of goods or services, for rental to others or for 
administrative purposes, and from which future economic or social benefit can be 
derived, such as plant, machinery and equipment; 

"competitive bid" in respect of a capital asset, the process in terms of which written 
bids are invited, evaluated and allocated in a prescribed manner for the acquisition of a 
capital asset of the municipality; 

"competitive process" may include competitive bidding, closed bidding, public auction 
and a proposal call; 

"Constitution" the Constitution of the Republic of South Africa, 1996; 

"disposal" in relation to a capital asset, includes- 

(a) the demolition, dismantling or destruction of the capital asset; or 

(b) any other process applied to a capital asset which results in loss of ownership of 
the capital asset otherwise than by way of transfer of ownership; 

"exempted capital asset" means a municipal capital asset which is exempted by section 
14(6) or 90(6) of the Act from the other provisions of that section; 

"fair market value" in relation to a capital asset, means the value at which a 
knowledgeable willing buyer would buy and a knowledgeable willing seller would sell 
the capital asset in an arm's length transaction; 

"high value" in relation to a capital asset of a municipality or municipal entity, means 
the fair market value of the capital asset where such value exceeds one per cent of the 
total value of the capital assets of the municipality or municipal entity, as determined 
from the latest available audited annual financial statements of the municipality or 
entity. 


"immovable assets" include, but is not limited to - 


4 



(a) immovable property or any share therein registered in the name of a person or 
entity, including, in the case of a sectional title scheme, a sectional title unit 
registered in the name of a person or entity; 

(b) a right to an exclusive use area held in terms of a notarial deed of cession; 

(c) a real right registered against immovable property in the name of a person or 
entity, excluding a mortgage bond registered against the property; 

(d) any share in a share block company as defined in section 1 of the Share Blocks 
Control Act, 59 of 1980; 

(e) a public place or public street; 

(f) immovable property as defined in section 107 of the Deeds Registries Act, 47 of 
1937; and 

(g) property consisting of land, buildings, improvements or structures attached to the 
land; 

"MFMA" the Municipal Finance Management Act, 2003 (Act 56 of 2003) and any 
regulations promulgated in terms thereof; 

"municipality" the Drakenstein Municipality and includes any official or committee 
authorised to make decisions with regard to the disposal or acquisition of immovable 
capital assets; 

"MATR" the Municipal Asset Transfer Regulations promulgated in terms of the MFMA 
(GG 31346 of 22 August 2008); 

"non-exempted capital asset" means a municipal capital asset which is not exempted 
by section 14(6) or 90(6) of the Act from the other provisions of that section; 

"non-viable assets" Immovable property that owing to urban planning or physical 
constraints or extent, cannot be developed on its own or function as a separate entity 
and only becomes functional if alienated or leased to an adjoining owner for usage in 
conjunction with the said owner's property; 

"restitution of a right in land" means- 

(a) the restoration of a right in land; or 

(b) equitable redress; 

"restoration of a right in land" means the return of a right in land or a portion of land 

dispossessed after 19 June 1913 as a result of past racially discriminatory laws or 

practices; 

"r e stitution" m e ans th e r e stitution of rights as r e gu l at e d in terms of th e R e stitution of 

Land Rights Act 1994 (Act 22 of 1994) 


5 













-"SCM Policy" the supply chain management policy of the municipality as adopted in 
terms of section 111 of the MFMA; 

"viable assets" means property that shall be deemed to be property that can be 
developed and function as a separate entity and can be registered as a separate entity 
in a Deeds Registry. 

CHAPTER 1: GENERAL PROVISIONS 


2. APPLICATION 

2.1 This policy is applicable to the disposal and management of all capital assets of the 
municipality as well as the granting of rights to use, control or manage municipal 
capital assets. 

3. LEGISLATIVE FRAMEWORK 

3.1 This policy is subject to the provisions of the following legislation- 

3.1.1 The MFMA and in particular section 14 1 thereof which governs the disposal of 
capital assets of the municipality; 

3.1.2 The MATR which regulates- 

3.1.2.1 The disposal and transfer of municipal capital assets; and 

3.1.2.2 The powers of the municipality to grant rights to lease, use, control or manage 
capital assets; 

3.1.3 The municipality's SCM policy as adopted in terms of the MFMA; and 

3.1.4 Any other legislation pertaining to immovable property. 

4. OBJECTIVES AND PRINCIPLES 

4.1 To provide a practical framework for the management and administration of the 


1 (1) A municipality may not transfer ownership as a result of a sale or other transaction or otherwise permanently dispose of 
a capital asset needed to provide the minimum level of basic municipal services. 

(2) A municipality may transfer ownership or otherwise dispose of a capital asset other than one contemplated in subsection 
(1), but only after the municipal council, in a meeting open to the public- 

(a) has decided on reasonable grounds that the asset is not needed to provide the minimum level of basic municipal 
services; and 

(b) has considered the fair market value of the asset and the economic and community value to be received in exchange 
for the asset. 


6 





municipality's assets; to determine the various categories of assets in order to 
regulate its use, disposal and acquisition and to establish criteria for evaluation of 
transactions and lay down procedures in respect of the various categories of 
transactions. 

4.2 The municipality realises that assets held by it which is not envisaged for or already 

used for public purposes or in the public's interest, should be dealt with in a manner 
which will ensure the greatest benefit to the municipality and the community. 

4.3 Assets will be sold or let at a reasonable market value except when the public interest 
or the plight of the poor demands otherwise. 

4.4 The market value of property for the purposes of disposal or letting shall be 
determined in terms of regulation 5(4) and (5) 2 of the MATR and shall be determined 
by an independent valuer. 


2 (4) The value of a capital asset must for purposes of subregulation (3)(b)(i) be determined in accordance with the 
accounting standards that the municipality is required by legislation to apply in preparing its annual financial statements. 
(5) In the absence of sufficient guidance in those accounting standards regarding the valuation of capital assets, any of the 
following valuation methods must be applied- 

(a) historical cost of the asset, adjusted for accumulated depreciation and any impairment losses as at the proposed 
date of transfer or disposal; 

(b) fair market value of the asset; 

(c) depreciated replacement cost of the asset; or 

(d) realisable value of the asset. 


7 



4.5 Where the municipality intends to dispose of or let assets for less than its fair market 
value, the considerations in regulations 7 3 and 13(2) 4 of the MATR must be taken into 
account. 

4.6 In terms of section 14(5) of the MFMA any transfer of ownership of a capital asset 
must be fair, equitable, transparent and competitive. 

4.7 Notwithstanding the provisions of paragraph 4.6 the municipality may authorise the 
direct disposal of immovable assets in the circumstances listed in paragraph 13 
provided that before such direct disposal is finally approved, the general public be 
afforded an opportunity to submit counter offers to acquire the asset, where after 
the application and the counter offers must be considered by Council. 

4.8 To give effect to section 40(1) of the municipality's SCM policy. 

5. POWERS OF THE MUNICIPALITY 

5.1 The municipality may, in achieving its operational and strategic objectives- 


3 The municipal council must, when considering any proposed transfer or disposal of a non-exempted capital asset in 
terms of regulation 5(l)(b)(i) and (ii), take into account- 

(a) whether the capital asset may be required for the municipality's own use at a later date; 

(b) the expected loss or gain that is expected to result from the proposed transfer or disposal; 

(c) the extent to which any compensation to be received in respect of the proposed transfer or disposal will result in 

a significant economic or financial cost or benefit to the municipality; 

(d) the risks and rewards associated with the operation or control of the capital asset that is to be transferred or 
disposed of in relation to the municipality's interests; 

(e) the effect that the proposed transfer or disposal will have on the credit rating of the municipality, its ability to 
raise long- term or short-term borrowings in the future and its financial position and cash flow; 

(f) any limitations or conditions attached to the capital asset or the transfer or disposal of the asset, and the 
consequences of any potential non-compliance with those conditions; 

(g) the estimated cost of the proposed transfer or disposal; 

(h) the transfer of any liabilities and reserve funds associated with the capital asset; 

(i) any comments or representations on the proposed transfer or disposal received from the local community and 

other interested persons; 

(j) any written views and recommendations on the proposed transfer or disposal by the National Treasury and the 
relevant provincial treasury; 

(k) the interests of any affected organ of state, the municipality's own strategic, legal and economic interests and the 
interests of the local community; and 

(l) compliance with the legislative regime applicable to the proposed transfer or disposal. 

4 (2) If a municipality or municipal entity on account of the public interest, in particular in relation to the plight of the poor, 
intends to transfer a non-exempted capital asset for less than its fair market value, the municipality or entity must, when 
consideringthe proposed transfer, take into account- 

(a) the interests of- 

(i) theState;and 

(ii) the local community; 

(b) the strategic and economic interests of the municipality or municipal entity, including the long-term effect of the 
decision on the municipality or entity; 

(c) the constitutional rights and legal interests of all affected parties; 

(d) whether the interests of the parties to the transfer should carry more weight than the interest of the local 
community, and how the individual interest is weighed against the collective interest; and 

(e) whether the local community would be better served if the capital asset is transferred at less than its fair market 
value, as opposed to a transfer of the asset at fair market value. 


8 



5.1.1 use, improve, benefit there from, dispose, let or allow its immovable assets to be 
developed or occupied or to permit it to be enclosed and cultivated; 

5.1.2 acquire assets and rights in assets by way of private treaty, cession, donation and 
expropriation; 

5.1.3 dispose of assets and rights in assets by way of direct sale, competitive bidding, 
auction and direct negotiation. 

5.1.4 let assets on a long term or short-term basis by way of direct negotiation or 
competitive bidding. 

5.1.5 subject to paragraph 4.5 determine subsidised selling prices, lease or rights to use 
tariffs in respect of assets; 

5.1.6 acquire and dispose of assets by means of exchange; 

5.1.7 lease assets for own purposes where necessary; and 

5.1.8 exercise such other competencies as may be reasonably necessary, or incidental to 
the effective performance of its functions. 

CHAPTER 2; DISPOSAL MANAGEMENT 

6. DISPOSAL MANAGEMENT SYSTEM 

The disposal management system in this policy comprises of competitive as well as non- 
competitive processes. 

6.1 Competitive processes 

6.1.1 In terms of section 14(5) of the MFMA, disposal of assets by the municipality must be 
fair, equitable, transparent, competitive and consistent with paragraph 40 of the 
municipality's SCM Policy. 

6.1.2 Provision is made for various disposal options as required by the different categories 
of assets of the municipality and may include one or more of the following- 

6.1.2.1 public auction; 

6.1.2.2 competitive bidding; 

6.1.2.3 closed bidding; 

6.1.2.4 call for applications; 

6.1.2.5 call for proposals; 

6.1.2.6 release for restitution purposes 

7. PUBLIC AUCTION 

7.1 Viable assets may be alienated by public auction in cases where the municipality is of 
the opinion that it is in the interest of the community and the municipality. 


9 



7.2 The terms and conditions of each auction shall be determined on a project-by-project 
basis, appropriate to the specific characteristics and attributes of the assets, and to 
the municipality's strategic objectives. 

7.3 Where the services of an auctioneer are utilised, the auctioneer's commission shall be 
payable by the successful bidder and shall not form part of the financial offer to the 
municipality. 

7.4 A reserve price, in other words the lowest price at which the municipality will sell the 
asset, must be determined by Council for the disposal of an immovable asset by public 
auction. 

7.5 The sale of an immovable asset to the highest bidder at a public auction is subject to 
approval by Council. 

7.6 Where viable assets are offered for sale by public auction and no offer is received, or 
where assets remain unsold after any other competitive process, the unsold assets 
may be sold out-of-hand at the reserve price or higher as long as the reserve price 
corresponds with fair market value. 

8. COMPETITIVE BIDDING 

8.1 The competitive bidding process may involve the call for purely financial offers for the 
asset offered for alienation. 

8.2 Depending on the nature of the transaction, competitive bidding may include a two- 
stage bidding process in terms of which only those bidders that meet the pre- 
qualification criteria specified in the first stage are entitled to participate in the second 
stage. 

8.3 Bids for the purchase and development of land other than residential land must be 
evaluated based on a functionality assessment of the development proposals and only 
bidders that pass a pre-determined functionality score may proceed to the second 
stage which will include the monetary bid. 

8.4 The City Manager may assign the committees established for the consideration of 
competitive bids in terms of the SCM policyforthe preparation of bid documents, and 
the evaluation and adjudication of competitive bids in terms of this policy. 


10 



8.5 After adjudication of a competitive bid, the matter must be referred to Council for a 
final decision to transfer the asset, but only after Council, in a meeting open to the 
public- 

(a) has decided on reasonable grounds that the asset is not needed to provide the 
minimum level of basic municipal services; and 

(b) has considered the fair market value of the asset and the economic and 
community value to be received in exchange for the asset. 

9 CLOSED BIDDING 

9.1 The closed bidding process may be applied in respect of the disposal of non-viable 
assets. 

9.2 If a non-viable asset has more than one adjacent owner and if such an asset is capable 
of being consolidated with more than one of such adjacent properties, then a closed 
bid may be called for from all the registered owners of all the adjacent properties with 
which the asset can be consolidated. 


10. CALL FOR APPLICATIONS 

10.1 The municipality may follow a less formal process in respect of the disposal, granting 
of rights to use or letting of assets for social care, community, ©f sport purposes or 
any other purposes that justify the process. 

10.2 In terms of this disposal option, applications may be invited in the press from 
organisations or individuals interested in the acquiring of land. Such applications must 
be supported by relevant information as requested by the municipality in order to 
assess the applications. 

10.3 A fixed selling price/rental must be determined, where applicable, in accordance 
with par 16.2 and 23 hereof before applications are invited. 

10.4 Proposals received in terms of this disposal option must be submitted to the relevant 
political structures for consideration. 

10.5 A public participation process must be followed. 

11. CALL FOR PROPOSALS 


11 



11.1 The Municipality may call for development proposals in respect of the property 
identified for alienation and development. 

11.2 In terms of this disposal option Council must determine a market related selling price 
in respect of the asset prior to calling for development proposals. 

11.3 Proposals received in terms of this disposal option must be submitted to the relevant 
political structures for consideration and recommendation to Council for approval. 

11.4 Where the type of development required for a capital asset is uncertain, Council may 
call for development proposals, which do not include a monetary bid, to determine 
the preferred type of development and development specifications. Such proposals 
must be submitted to the relevant political structures for consideration and a 
recommendation to Council on the preferred type of development, the development 
specifications as well as the disposal option to be followed. 

12. RELEASE OF IMMOVABLE ASSETS FOR RESTITUTION PURPOSES 

12.1 The Municipality may release immovable capital assets to the Department of Rural 
Development and Land Reform upon formal request from the Regional Land Claims 
Commission, for the purposes of restitution of rights as envisaged in terms of the 
Restitution of Land Rights Act 1994 (Act 22 of 1994); 

12.2 Capital assets released for this purpose shall be disposed of at subsidized prices as 
applicable to social care, community and sports assets; 

12.3 Where capital assets released for restitution purposes form part of government 
programs, such programs will guide the selling prices applicable and may also be 
"gratis" 

13. DISPOSAL BY DIRECT NEGOTIATION 

13.1 Non-viable assets 

13.1.1 In respect of assets which can only be utilized by one or more adjacent land 
owners, a transaction(s) may be approved by Council without the any formal 
competitive process as envisaged in paragraph 8 above having been followed, 
including in response to an unsolicited application, on the basis that no purpose 
would be served by a form al-such competitive process. 


12 









13.1.2 Direct disposal of non-viable assets must incorporate the principle of 
competitiveness by, inviting in the press, other interested parties to submit counter 
applications or offers. The proposed disposal must also be advertised for objections 
or comments where after all applications must be considered. 

13.1.3 Upon approval of a transaction contemplated in paragraph 13.1.1, the City Manager 

must minute the reasons for the decision. 

13.2 Viable assets 

13.2.1 The Council may dispense with the formal competitive processes as envisaged in 
paragraph 8 above e stab li sh e d i n th i s po li cy, and may enter into a transaction 
through any convenient process, which may include direct negotiation or 
consideration of an unsolicited application, but only in the following 
circumstances - 

13.2.1.1 where specific circumstances peculiar to the asset has the result that it can only 
be utilized by the one person/organization wishing to enter into the transaction; 

13.2.1.2 where the applicant wishing to enter into the transaction is the sole provider of 
the service or product in respect of which the property will be used and the use 
of the property is inextricably linked to the provision of that service or product; 

13.2.1.3 where the council is satisfied that the transaction will be exceptionally beneficial 
to the municipality or the community, or has exceptional cost advantages for the 
municipality which would not be realised if a competitive process were to be 
followed; 

13.2.1.4 where the applicant applies for an asset abutting the applicant's current property 
which is required for extending its existing establishment/business and such 
extension will be in the public interest; or 

13.2.1.5 any other circumstances where council is of the view that it will not be in the 
interest of the municipality or of the community in general to followa competitive 
process. 

13.3 Direct disposal of viable assets must incorporate the principle of competitiveness by 
inviting in the press 7 other interested parties to submit counter applications or offers. 
The proposed disposal must also be advertised for objections or comments where 
after all applications must be considered. 

13.4 Upon approval of a transaction contemplated in paragraph 13.2.1, the City Manager 
must minute the reasons for the decision. 

14. SOCIAL CARE, COMMUNITY, AND SPORT ASSETS 


13 








14.1 Where the municipality receives an application or proposal to acquire assets for social 
care, community or sport purposes or where an asset is disposed of in the interest of 
the public or as result of the plight of the poor, the following factors must be taken 
into account in justifying not following a competitive bidding process- 

14.1.1 whether the applicant has historically enjoyed a property right granted by the 
municipality and has fulfilled and complied with all responsibilities and obligations 
in terms of the agreement with the municipality; 

14.1.2 the exact nature of the social care, community or sport purpose; 

14.1.3 whether the social care, community or sport purpose will satisfy a priority need 
in the community; 

14.1.4 whether the municipality is satisfied with the manner in which the applicant gives 
effect to the social care, community or sport purpose; or 

14.1.5 whether the transaction will be exceptionally beneficial to the municipality or 
the community, or have exceptional cost advantages for the municipality. 

14.2 Forthe purposes of this policy "social care, community or sport assets" includes, but 
is not limited to- 

14.2.1 places of worship being used forspiritual gatheringand social, pastoral or welfare 
caring and support to worshippers and the broader community; 

14.2.2 childcare facilities insofar as it contributes to the functioning of a multi-use 
childcare facility and is operated on a non-profit basis; 

14 . 2.3 retirement villages for that portion of the building or facility available to general 
public use at subsidized or nominal prices; 

14.2.4 schools and other government services; 

14.2.5 centres utilised as homes for the handicapped and disabled persons; 

14.2.6 non-profit rehabilitation centres; 

14.2.7 homes/centres for indigent, homeless or destitute persons; 

14.2.8 organizations for the homeless and elderly; 

14.2.9 youth activity centres; 

14.2.10 skills development centres; 

14.2.11 non commercial sport facilities; 

14.2.12 churches which also render social development services in addition to existing 
religious activities, or 

14.2.13 housing units funded or partly funded by government housing subsidies aiming 
to promote first time home ownership. 


15. PLACESOF WORSHIP 


14 



15.1 The following factors shall be considered relevant in the selection and allocation of 
immovable assets to places of worship- 

15.1.1 the size of the congregation in relation to the size of the available site; 

15.1.2 the availability of finance to acquire the site and commence with development 
within the agreed development period; 

15.1.3 whether or not welfare type facilities/activities will be provided in addition to 
religious facilities; 

15.1.4 whether or not the congregation members are drawn from the area in which 
the asset is situated; or 

15.1.5 whether or not the development makes provision for multi-purpose social use 
which could address the need for other social activities. 

16. SELLING PRICES 

16.1 Market related prices 

16.1.1 Immovable assets may be disposed of only at market-related prices, except when 
the plight of the poor or public interest demand otherwise. 

16.1.2 Market related selling prices may be discounted in lieu of an immovable capital 
asset to be developed by the purchaser provided that appropriate guarantees are 
provided by the purchaser, and/or any other form of community value to be 
gained by- the mMunicipality. 

16.2 Subsidized prices/rates 

16.2.1 If the municipality, on account of the public interest, particularly in relation to the 
plight of the poor, intends to dispose of a non-exempted asset for less than 
market value it must take into account the factors specified in Regulation 13(2) of 
the MATR. 5 


5 (2) If a municipality or municipal entity on account of the public interest, in particular in relation to the plight of the poor, 
intends to transfer a non-exempted capital asset for less than its fair market value, the municipality or entity must, when 
considering the proposed transfer, take into account- 

(a) the interests of- 

(i) theState;and 

(ii) the local community; 

(b) the strategic and economic interests of the municipality or municipal entity, including the long-term effect of the 
decision on the municipality or entity; 

(c) the constitutional rights and legal interests of all affected parties; 

(d) whether the interests of the parties to the transfer should carry more weight than the interest of the local 
community, and how the individual interest is weighed against the collective interest; and 

(e) whether the local community would be better served if the capital asset is transferred at less than its fair market 
value, as opposed to a transfer of the asset at fair market value. 


15 



16.2.2 Subject to the factors specified in Regulation 13(2) of the MATR, the municipality 
may dispose of social care, community or sport assets as well as assets identified 
for restitution purposes at between 5% and 20% of fair market value subject to a 
suitable reversionary clause being registered against the title deed of the property. 

16.2.3 In the event of property mentioned in 16.2.2 ceasing to be used for the purpose 
originally intended, reversionary rights as contemplated in par 18.10 are triggered 
and the municipality reserves the right to demand compensation equal to the 
difference between the purchase price and the current fair market value of the 
property, or that the property be transferred into the ownership of the 
municipality at no cost for the municipality. 

17. PLIGHT OF THE POOR 

Whenever the plight of the poor is a consideration in any decision to be taken in respect 
of the acquisition, disposal or letting of immovable assets, regard shall be given to the 
conditions mentioned in regulation 13(2) of the MATR. (See footnote 5) 

18. STANDARD CONDITIONS OF SALE 

18.1 Purchasers shall be responsible for all costs, and where applicable, all action 
pertaining to a transaction e.g. survey, rezoning, subdivision, consolidation, 
advertisement, relocation orprovisionofservices, provided that the municipality may 
decide to waive its right to recover such costs if the reason for the sale is to rid the 
municipality of the burden to maintain orexercise control there over or where the 
capital asset will be. 

18.2 All statutory requirements must be met by the purchaser at his or her own costs. The 
municipality may on account of the public interest or the plight of the poor, decide 
to undertake one or more of the statutory requirements at the municipality's cost. 

18.3 Where applicable, existing services may besecured by means ofthe registration of a 
servitude in favour of the municipality or be suitably protected, and costs shall be 
for the account of the purchaser. 

18.4 Immovable property which is sold to an adjacent owner,shall berezoned,closedand 
consolidated withthe purchaser's property at his or her cost. 

18.5 Development of vacant land sold must commence within such time frames as 
agreed upon, or in accordance with the conditions of sale, or in accordance with the 
development program provided by the purchaser and must be completed within a 


16 



period stipulated in the deed of sale or the approved development program of the 
applicant. 


18.6 The municipality shall have a reversionary right against re-payment of the original 
purchase price to transfer the property into its name where the purchaser fails to 
complete the intended development within the agreed time frame. Reversionary 
rights are applicable to successors in title. 

18.7 In addition to re-transfer of the property as envisaged in paragraph 18.6, the 
municipality may require payment for damages in accordance with the provisions 
of the deed of sale. 

18.8 The municipality reserves the right to impose such additional conditions as deemed 
necessary, without limitingitsrightstoliquidateddamage. 

18.9 The deed of sale may provide for the payment of occupational interest from date of 
occupation, as agreed upon, until transfer of the property in the name of the 
purchaser. 

18.10 A reversionary clause, in terms of which assets will reverttothe municipality without 
cost and free of any claims, shall beapplicable to immovable assets sold belowmarket 
value. 

18.11 A pre-emptive clause shall be applicable to an undeveloped asset should the 
purchaser intend to sell such asset or a portion thereof or intend to use it for 
purposes other than the purposes specified in the transaction conditions. 

18.12 Immovable property may only be used for the purpose as approved by council and 
in accordance with the approved town planning scheme. 

18.13 A deed of sale must be signed within 60 days from the date of official request by the 
municipality, or within such extended period as may be agreed upon failing which the 
transaction shall lapse. 

18.14 A suspensive condition shall be applicable to all transactions that are subject to the 
approval of land use rights or approvals in terms of other legislation and the 
municipality may add additional suspensive conditions in respect of any other matter 
it deems appropriate. 

18.15 Interest on the purchase price may be charged by the municipality after expiry of a 
stipulated period from the date of sale, or should payment 


17 



or transfer be delayed due to action or failure on the part of the purchaser or during 
the validity period of suspensive conditions. 


19. PROPERTY NOT FOR DISPOSAL 

The municipality may not dispose of a property needed to provide the minimum level 
of basic municipal services, 6 save where the disposal is to another organ of State, as 
provided for in section 14(6) of the MFMA read with Chapter 3 of the MATR. 

20. EXEMPTED DISPOSALS TO ORGANS OF STATE 

20.1 The disposal of property to other organs of state are exempted from the 
requirements of sections 14(1) to (5) of the MFMA 7 . Such exemption shall however 
only apply if the circumstances listed in regulation 20 8 of Chapter 3 of the MATR are 
applicable. 

20.2 Where none of the circumstances listed in regulation 20 of the MATR are applicable, 
and where the transfer to another organ of state is done as part of a normal 
commercial transaction, it shall be subject to the provisions of sections 14 and 90 of 
the MFMA. 

21. NON-EXEMPTED DISPOSALS (SECTION 14) 


6 Defined in the Systems Act as, "a municipal service that is necessary to ensure an acceptable and reasonable quality of life 
and, if not provided, would endanger public health or safety or the environment". 

1 See footnote 1 

8 8 (1) Section 14(1) to (5) and section 90(1) to (5) of the Act does not apply if a municipality or municipal entity transfers a 
capital asset to an organ of state in any of the following circumstances: 

(a) When transfer of a capital asset emanates from a review by a municipality of its service delivery mechanisms for the 
performance of a municipal service in terms of Chapter 8 of the Municipal Systems Act and the municipality appoints 
another organ of state as the preferred option for the performance of the service; 

(b) when transfer of a capital asset emanates from a reorganisation of powers and functions between a parent 
municipality and its municipal entity, including asset transfers contemplated in section 84 of the Act; 

(c) when transfer of a capital asset emanates from an assignment of any of the powers or functions of a municipality to 
another organ of state by national legislation or in terms of a power contained in national legislation, including an 
assignment of powers or functions following- 

(i) an adjustment of the division of powers and functions between a district municipality and local municipalities 
within the district in terms of section 85 of the Municipal Structures Act; 

(ii) an authorisation in terms of section 84(3) the Municipal Structures Act; or 

(iii) a re-demarcation of municipal boundaries in terms of the Municipal Structures Act; 18 

(d) when municipal housing or land is transferred to a national or provincial organ of state for housing for the poor or in 
terms of a national or provincial housing policy; 

(e) when transfer of a capital asset to an organ of state is required or permitted in terms of national legislation and that 
legislation determines the conditions of the transfer; or 

(f) any other circumstance not provided in paragraph (a) to (e), provided that- 

(i) the capital asset to be transferred is determined by resolution of the council to be not needed for the provision 
of the minimum level of basic municipal services and to be surplus to the requirements of the municipality; and 

(ii) if the capital asset is to be transferred for less than fair market value, the municipality takes into account- 
(aa) whether the capital asset may be required for the municipality or a municipal entity under the 

municipality's sole or shared control at a later date; 


18 



21.1 In respect of non-exempted disposals, sections 14(1) to (5) of the MFMA, as well as 
well as Chapter 2 of the MATR, which provides the framework for the 
implementation of these aspects of section 14 of the MFMA, must be complied with. 
In terms of section 14(1) to (5) of the MFMA, the municipality may transfer or 
permanently dispose of such property only after the following requirements are 
met - 

21.1.1 a public consultation process as set out in regulations 5(l)(a) and (2) of the MATR 
must be undertaken in case of a high-value capital asset; 

21.1.2 the municipality, in a meeting open to the public, must have decided on 
reasonable grounds that the asset is not needed to provide the minimum level of 
basic municipal services; and 

21.1.3 the municipality must have considered the fair market value of the asset and the 
economic and community value to be received in exchange for the asset 9 . 

21.2 Because of the determinations in 21.1.2 and 21.1.3 the municipality has to must 
decide on "approval in principle" for the transfer or disposal of the capital asset as 
required in terms of regulation 5(l)(b)(ii) of the MATR. 

21.3 The additional factors to be taken into consideration by the municipality for an 
"approval in principle", to the extent that they are applicable to each particular case, 
are set out in regulations 7 10 , ll * 11 and 13(2) of the MATR. 

21.4 The decision making process in respect of high value capital assets is prescribed by 
Part 1 of Chapter 2 of the MATR and includes- 

21.4.1 a request to Council, accompanied by an Information Statement, 12 to authorize 
the City Manager to conduct a public participation process; and 


9 See footnote 1. 

10 See footnote 3 

11 An approval in principle in terms of regulation 5(l)(b)(ii) or 8(l)(b)(ii) that a non-exempted capital asset may be 
transferred or disposed of, may be given subject to any conditions, including conditions specifying 12 - 

(a) the way in which the capital asset is to be sold or disposed of; 

(b) a floor price or minimum compensation for the capital asset; 

(c) whether the capital asset may be transferred or disposed of for less than its fair market value, in which case the 
municipal council must first consider the criteria set out in regulation 13(2); and 

(d) a framework within which direct negotiations for the transfer or disposal of the capital asset must be conducted 
with another person, if transfer or disposal is subject to direct negotiations. 

12 (b) A request to the municipal council for authorisation of a public participation process must be accompanied by an 
information statement approved by the board of directors of the municipal entity stating- 

(i) the valuation of the capital asset to be transferred or disposed of and the method of valuation used to 
determine that valuation; 

(ii) the reasons for the proposal to transfer or dispose of the capital asset; 

(iii) any expected benefits to the municipal entity that may result from the transfer or disposal; 

(iv) any expected proceeds to be received by the municipal entity from the transfer or disposal; and 

(v) any expected gain or loss that will be realised or incurred by the municipal entity arising from the 

transfer or disposal. 


19 





21.4.2 the undertaking of a public participation process by the City Manager as 
prescribed in regulation 6 of the MATR. 13 

21.5 The municipality must undertake a public participation process which entails a 30 
days' notice in the local press in respect of the intended disposal of immovable 
capital assets, other than subsidized housing and exempted property. 


CHAPTER 3: 6RAMTIIMG OF RIGHTS TO USE, CONTROL QR MANAGE MUNICIPAL CAPITAL 

ASSETS 


22. PROPERTY RIGHTS 

22.1 Chapter 4 of the MATR governs the granting of a property right in circumstances 
where section 14 of the MFMA does not apply, in other words, where the granting 
of such rights do not amount to the transfer or permanent disposal of the asset, for 
example when a right is acquired through a leasing, letting or hiring out 
arrangement. 

22.2 Regulation 33(3) in Chapter 4 of the MATR specifies the circumstances in which a 
property right must be dealt with as if such granting of a property right is subject to 
section 14 of the MFMA. 14 

23. SUBSIDIZED RATES 

23.1 Market related rates will apply to the granting of rights to use immovable property 
except where the plight of the poor, the public interest as well as the operational 
needs and strategic objectives of the municipality demand otherwise. 


13 "The accounting officer must, at least 60 days before the Council meeting at which the Council will make the Section 14 
Determinations and will decide whether to grant In Principle Approval for the Disposal, in accordance with section 21A of 
the Systems Act, to make public the proposal to dispose, together with the Information Statement to invite the local 
community and other interested persons to submit to the Council comments or representations in respect of the proposed 
Disposal; and to solicit the views and recommendations of National Treasury and Provincial Treasury." 

14 (3) The granting by a municipality or municipal entity of a right to use, control or manage a capital asset must for the 
purposes of these Regulations be dealt with in terms of Chapter 2 or 3 as if such granting of a right is a transfer within the 
meaning of that Chapter, if the right- 

(a) is granted for an indefinite or undetermined period; 

(b) is granted for a period which exceeds- 

(i) the useful life of the capital asset; or 

(ii) the economic usefulness of the capital asset and which would require the asset, in order to remain 
economically useful, to be substantially upgraded, altered or replaced during the period for which the right is granted; or 

(c) confers on the person to whom the right is granted - 

(i) option to buy or acquire ownership in the capital asset; or 

(ii) the power to use, control or manage the capital asset as if that person is the beneficial (but not legal) 
owner of the asset. 


20 


23.2 Taking into account the public interest and the municipality's strategic objectives with 
regard to the promotion of local economic development, the municipality may 
allocate business space in municipal buildings to micro and very small enterprises at 
subsidized rental on the following basis: 


23.2.1 (a) rental for the first year: 

(b) rental for the second year: 

(c) rental for the third year: 

(d) rental for the fourth year: 


20% of market related rental; 

50% of market related rental; 

75% of market related rental; 

100% of market related rental; and 


23.2.2 that the phasing in of the rental only be granted once to the same owner; 


23.3 In addition to the aforegoing the Municipality may in terms of its annual budget, 
approve fixed rates in respect of the use of assets or classes of assets. 


23.4 For the purposes of paragraph 23.2 "micro enterprise" and "very small enterprise" 
means enterprises as defined in the National Small Enterprises Act, 1996 (Act 102 of 
1996), attached as Annexure A. 

23.5 The provisions of paragraph 25, with the necessary changes, are applicable to rentals 
in terms of paragraph 23. 

23.6 The municipality may grant rights to use in respect of social care, community or sport 
assets or in circumstances where the plight of the poor or community interests so 
demands, at between 5% and 20% of fair market value. 

23.7 The granting of rights to use to may be "gratis" in the following circumstances: 

23.7.1 Where an authority or service provider renders local government functions as per 
Schedule 4B and 5B of the Constitution of the Republic of South Africa,1996; 

23.7.2 The use of assets for security purposes in residential areas. 

24. DECISION MAKING PROCESS FOR GRANTING OF RIGHTS TO USE, CONTROL OR 
MANAGE MUNICIPAL CAPITAL ASSETS 

24.1 Part 1 of Chapter 4 of the MATR specifies a process for decision-making by a 
municipality in respect of the granting of a right to use, control or manage municipal 
capital assets. 


21 



24.2 The consideration of any proposal for the granting of a right to use, control or 
manage municipal capital assets is subject to the provisions of regulation 36 15 of the 
MATR. 

24.3 Where an asset is classified as long-term-high-value, the first phase in the process of 
decision-making is public participation. In terms of the MATR, this phase applies only 
to a long-term high-value right and includes- 

24.3.1 a request to council, accompanied by an Information Statement, 16 to authorize 
the City Manager to conduct a public participation process; and 

24.3.2 the City Manager conducting a public participation process as prescribed in the 
MATR 17 . 

24.4 The City Manager may determine the form that the public participation -process 
should take. 

24.5 Once the public-participation phase of the decision-making process has been 
completed, a decision must be taken by council as to whether to grant an in principle 
approval in respect of the granting of the property right. 

24.6 The municipality may delegate its power to authorise a public participation process 
to the City Manager in respect of a property right with a value of less than RIO million 
and where a long term right is not granted. 

24.7 "Long-term high-value right" means a property right with a value in excess of 
RIO million which is granted for a period exceeding three years; 

25. STANDARD CONDITIONS OF LEASE 


15 The municipal council must, when considering in terms of regulation 34(l)(b) approval for any proposed granting of a 

right to use, control or manage a capital asset, take into account- 

(a) whether the capital asset may be required for the municipality's own use during the period for which the right is 
to be granted; 

(b) the extent to which any compensation to be received for the right together with the estimated value of any 
improvements or enhancements to the capital asset that the private sector party or organ of state to whom the 
right is granted will be required to make, will result in a significant economic or financial benefit to the 
municipality; 

(c) the risks and rewards associated with the use, control or management of the capital asset in relation to the 
municipality's interests; 

(d) any comments or representations on the proposed granting of the right received from the local community and 
other interested persons; 

(e) any written views and recommendations on the proposed granting of the right by the National Treasury and the 
relevant provincial treasury; 

(f) the interests of any affected organ of state, the municipality's own strategic, legal and economic interests and the 
interests of the local community; and 

(g) compliance with the legislative regime applicable to the proposed granting of the right. 

16 See footnote 11 

17 See footnote 12 


22 



25.1 


A lessee shall be responsible for all costs, and where applicable, all action pertaining 
to a transaction e.g. survey, rezoning, subdivision, consolidation, advertisement, 
relocation orprovisionofservices, provided that the municipality may decide to waive 
its right to recover such costs if the transaction is deemed to be in the general interest 
of the broader community. 

25.2 Notransaction shall beprocessed unlesstheapplicanthasconfirmed inwriting that he 
or she will bearallapplicablecostsassetoutin paragraph 25.1 and all other conditions 
imposed bythe municipality will be complied with. 

25.3 Deposits or equivalent security/guarantees may be applicable to the lease of assets. 

25.4 No immovable property shall be sub-let, ceded or assigned by the lessee, without 
the prior written approval of the municipality given by the City Manager or his or her 
assignee. 

25.5 An owner of immovable property who leases an adjoining municipal property may 
be substituted by his successor in title for the duration of the remainder of the 
lease term on the same terms and conditions oradditional terms and conditions. 

25.6 Rental escalation overthe term of the lease shall be calculated at the time of approval 
to provide for a fixed rental over the lease period. 

25.7 The lessee shall be liable for payment of service charges unless exempted by Council. 

25.8 The rental of lanes, public open spaces and road reserves shall be subject to- 

25.8.1 temporary or permanent closure where necessary; 

25.8.2 payment of costs for the re-location or installation of services where 
necessary; and 

25.8.3 protection of services at the cost of the applicant, if required. 

25.9 The lessee shall indemnify the municipality against claims arising from the lease or 
use of the property. 

25.10 The property may only be used for the purposes it is let and purposes allowed by the 
town planning scheme. 

25.11 A lease agreement shall be concluded and signed within reasonable time from the 
date of official request by the municipality failing which the transaction shall lapse 
and the applicant shall forfeit his or her deposit and be held liable for costs exceeding 


23 



the deposit amount. 


25.12 Officials of the municipality shall be entitled to enter and inspect the leased premises 
at reasonable times. 

25.13 The lessee must maintain the leased property, to the extent required in terms 
of the lease agreement. 

25.14 Improvements made by the lessee shall revert back to the municipality upon expiry 
of the lease agreement or in case of cancellation of the agreement as result of non- 
compliance with conditions. Should the agreement be terminated early at the 
initiative of the municipality for municipal purposes, the municipality may by mutual 
agreement compensate the lessee for part of the actual cost of the improvements. 

26. SHORT TERM USE 

26.1 The City Manager may approve the lease of property for periods not exceeding 90 
days in circumstances where it is in the interest of the community that the asset be 
occupied without delay, subject to the following- 

26.1.1 the applicant must at his or her cost connect to municipal services if required; 

26.1.2 the leased property must be returned to the municipality in its original state and 
the lessee shall be held liable for any damages caused by him or her to the leased 
property; 

26.1.3 the applicant must indemnify the municipality against claims arisingfrom the lease 
or use of the property; and 

26.1.4 the Adm i n i strat i on municipality promptly implements the necessary procedures 
for the formal approval of the proposed use right. 

27. PROJECTIONS, PROJECTING STRUCTURES, ENCROACHMENTS AND OTHER MINOR 
RIGHTS TOUSE 

27.1 The municipality may, subject to conditions it may deem necessary, including the 
payment of rental, permit the erection or retention of a veranda, balcony, or similar 
structure which projects or encroaches into or over any public place, public street or 
road reserve. 

27.2 The following rights to use may also be permitted as depicted in the table below and 
the necessary authority is hereby granted to the relevant senior managers as stated 
therein:- 


24 




APPLICATIONS FOR RIGHTS TO USE, CONTROL OR MANAGE IMMOVABLE PROPERTY 

No 

Type of application 

Public consultation 

Compensation 

Approval by 

1 

Projections over street sidewalks and road 

reserves 

None 

Once off payment as per 
budget tariffs 18 

Executive Director: 

Planning and Development 
as part of building plan 

process 

2. 

Minor building works over road reserves (as 
defined in the National Building Regulations) 

2.1 Depending on nature of 

application place 

notice in local press 

2.2 Applicant to obtain 

written consent of 

neighbours where 

necessary 

Once off payment as per 
budget tariffs 

Executive Director: 

Planning and Development 
as part of building plan 

process 

3. 

Gardening purposes over road reserves/sidewalks 

3.1 Depending on nature of 

application place 

notice in local press 

3.2 Applicant to obtain 

written consent of 

neighbours where 

necessary 

Fenced encroachments 

Once off payment as per 
budget tariffs 

Unfenced encroachments 

No fee 

Executive Director: 

Engineering Services 

(subject to entering into a 
temporary encroachment 
agreement) 

4. 

Gardening purposes over public places 

Notices to surrounding 

owners as well as notice in 

the press 

Fenced encroachments - 

Once off payment as per 
budget tariffs 

Unfenced encroachments 

No fee 

Executive Director: 

Planning and Development 
(subject to entering into a 
temporary encroachment 
agreement) 


18 Rentals in this table can also be at less than market value if public interest or the plight of the poor demands otherwise. 


25 




5. 

Temporary closure of pedestrian lanes and 
granting of a Use Right for purposes other than for 
security reasons. 

Notice to surrounding 

owners as well as notice in 

the press 

Market related rental 

Executive Mayor 

6. 

Temporary closure and granting of Use right to 
adjacent owner to close pedestrian lane for 
security purposes 

Notice to adjacent owners 

as well as notice in the 

press 

No fee 

Executive Mayor 

7. 

Vehicle access encroachments and paving 

encroachments 

7.1 Depending on nature of 

application place 

notice in local press 

7.2 Applicant to obtain 

written consent of 

neighbours where 

necessary 

Fenced encroachments - 

Once off payment as per 
budget tariffs 

Unfenced encroachments 

No fee 

Relevant Executive Director 

Executive Director: 

Engineering Services 

(subject to entering into a 
temporary encroachment 
agreement) 

8. 

1 nstallation of communication infrastructure on 

municipal property 

Depending on nature of 
infrastructure, notify 

owners as well as notice in 

the press 

Market related rental 

Executive Mayor 

9. 

Temporary use of vacant municipal land 
(maximum 90 days) 

Notice in local press 
depending on nature of use 

Non-commercial and 

municipal related use - No 

fee. 

City Manager 

10. 

Outside seating for restaurants, taverns, etc. 

Notices to surrounding 

owners as well as notice in 

the press 

Market related rental 

Executive Mayor 

11. 

Once-off letting of town halls and community halls 

None 

Once off tariffs as per 
budget 

Executive Director: 

Community Services. 


26 




12. 

Once-off letting of sports facilities 

None 

Tariffs as per budget 

Executive Director: 

Community Services. 

13. 

Way leaves (cables, pipes, electronic 
communication network etc. under streets, road 
reserves and public open spaces) 

None 

Once off tariff as per 
budget 

Executive Director: 

Engineering Services 
(subject to entering into an 
agreement) 

14. 

Letting of kiosks at municipal swimming pools 
and municipal resorts (maximum period of 24 
months) 

Invitation of applications 
(subjectto prior in-principle 
approval by City Manager) 

Tariffs as per budget 

Executive Director: 

Community Services 

15. 

Letting of municipal dwellings identified for lease 
to municipal staff (maximum period of 36 
months) 

None 

Tariffs as per budget. 

Executive Director: 

Community Services. 

16. 

Letting of informal trading spaces/stands 
(maximum period of 36 months) 

Invitation of applications 
(subjectto prior in-principle 
approval by City Manager) 

Tariffs as per budget 

Executive Director: 

Planning and Development 

17. 

Letting of rooms/space in Thusong Centres and 
other public facilities under the control of the 
Executive Director: Community Services 
(maximum period of 24 months) 

Invitation of applications 
(subjectto prior in-principle 
approval by City Manager) 

Tariffs as per budget 

Executive Mayor 


27 




CHAPTER 4: MANAGEMENT AND DISPOSAL OF MOVABLE ASSETS 


28. GENERAL PRINCIPLES 

28.1 The accounting officer must implement an effective system for the management and 
disposal of movable assets, including but not limited to unserviceable, redundant or 
obsolete assets, subject to sections 14 and 90 of the MFMA. 

28.2 Any disposal of a movable asset must be fair, equitable, transparent, competitive and 
consistent with the SCM policy of Council. 

29. DISPOSAL 

29.1 When Council considers the disposal of movable assets, the following must be complied 
with- 

29.1.1 consider the determinations as envisaged in terms of Section 14(2) of the MFMA; 

29.1.2 take into account the issues as contained in Regulations 36 of the MATR 19 ; 

29.1.3 the general procedures as laid down in Chapters 2 and 4 of the MATR. 

29.2 A request for assets below the value of R200, 000 to be sold must be submitted to the 
City Manager by the supply chain management section which must be accompanied by 
a list of assets to be sold and the reasons for sale. 

29.3 The City Manager is authorised to dispose of movable assets below a value of R2 million, 
and to make the determinations in terms of section 14(2) (a) and (b) of the MFMA, 
provided that, in respect of assets above a value of R200, 000 not being auctioned, the 
City Manager shall first consider a recommendation from the Bid Adjudication 
Committee. 

29.4 Movable assets must be sold at market value unless the public interest or the plight of 
the poor demands otherwise, in which case the considerations listed under regulation 
13(2) of the MATR 20 , must be taken into account. 

30. METHODS OF DISPOSAL 

19 See footnote 15 

20 See footnote 4 

28 



30.1 Movable assets may be sold by- 

30.1.1 public auction; 

30.1.2 public tender; 

30.1.3 written price quotations; 

30.1.4 donation; or 

30.1.5 any other method which is the most beneficial to Council, except when the public 

interest or the plight of the poor demands otherwise. 

31. ADMINISTRATION 

31.1 Assets disposed of must be written off and accounted for in the asset register; 

31.2 Assets earmarked for sale by the asset section must be reclassified as "assets held-for- 
sale" and must be transferred to the auction store. 

31.3 The Bid Adjudication Committee, as established by the City Manager in terms of the SCM 
Policy, is authorised to consider tender evaluation reports and to submit 
recommendations to the City Manager. 

32. CONDITIONS FOR DISPOSAL 

32.1 Before deciding on a particular disposal method, the following should be considered: 

32.1.1 the nature of the asset as determined by the municipal asset section; 

32.1.2 the potential market value; 

32.1.3 other intrinsic value of the asset as determined by the municipal asset section; 

32.1.4 its location; 

32.1.5 itsvolume; 

32.1.6 its trade-in price; 

32.1.7 its ability to support wider Government programmes; 

32.1.8 environmental considerations; 

32.1.9 market conditions; 

32.1.10 the asset's life as determined by the municipal asset section. 

33. GENERAL CONDITIONS FOR DISPOSAL VIA TENDER OR AUCTION 

33.1 A notice of the intention of the municipality to sell the asset must be published in a local 


29 



newspaper. 


33.2 When the public auction or tender route is followed- 

33.2.1 the municipality may appoint an independent appraiser to determine the fair market 
value of the asset; and 

33.2.2 the municipality may appoint an independent auctioneer on either a quotation 
basis or by tender depending on the value of the goods to be disposed of. 

34. GENERAL CONDITIONS FOR DISPOSAL VIA WRITTEN PRICE QUOTATION 

34.1 Bidders are afforded the opportunity to make a sealed enveloped offer on identifiable 
items. 

34.2 Bids will be opened in public and evaluated in terms of the SCM Policy. 

35. GENERAL PRECONDITION FOR DISPOSAL VIA DONATION 

35.1 Requests for donations must be motivated to the City Manager in writing for 
approval. 

35.2 Public request for donations received must be submitted to the SCM Section, and 
will be submitted to the City Manager by way of written report. 

35.3 The donation process should be in accordance with the Municipal Grant Policy, as 
approved. 


30 



ANNEXURE A 
(Paragraph 23.2) 


Column 1 

Column 2 

Column 3 

Column 4 

Column 5 

Sector or subsector 

in accordance with 

the Standard 

Industrial 

Classification 

Size of class 

The total 

full-time 

equivalent of 
paid 

employees 

Total 

turnover 

Total gross 

asset value 

(fixed 

property 

excluded) 

Agriculture 

Medium 

100 

R5m 

R5m 


Small 

50 

R3m 

R3m 


Very Small 

10 

R0.50m 

R0.50m 


Micro 

5 

R0.20m 

RO.lOm 

Mining and 

Quarrying 

Medium 

200 

R39m 

R23m 


Small 

50 

RlOm 

R6m 


Very Small 

20 

R4m 

R2m 


Micro 

5 

R0.20m 

RO.lOm 

Manufacturing 

Medium 

200 

R51m 

R19m 


Small 

50 

R13m 

R5m 


Very Small 

20 

R5m 

R2m 


Micro 

5 

R0.20m 

RO.lOm 

Electricity, Gas and 

Water 

Medium 

200 

R51m 

R19m 


Small 

50 

R13m 

R5m 


Very Small 

20 

R5.10m 

R1.90m 


Micro 

5 

R0.20m 

RO.lOm 

Construction 

Medium 

200 

R26m 

R5m 


Small 

50 

R6m 

Rlm 


Very Small 

20 

R3m 

R0.50m 


Micro 

5 

R0.20m 

RO.lOm 

Retail and Motor 

Trade and Repair 

Services 

Medium 

200 

R39m 

R6m 


Small 

50 

R19m 

R3m 


Very Small 

20 

R4m 

R0.60m 


Micro 

5 

R0.20m 

RO.lOm 

Wholesale Trade, 
Commercial Agents 

and Allied Services 

Medium 

200 

R64m 

RlOm 


31 





Small 

50 

R32m 

R5m 


Very Small 

20 

R6m 

R0.60m 


Micro 

5 

R0.20m 

RO.lOm 

Catering, 

Accommodation and 

other Trade 

Medium 

200 

R13m 

R3m 


Small 

50 

R6m 

Rlm 


Very Small 

20 

R5.10m 

R1.90m 


Micro 

5 

R0.20m 

RO.lOm 

Transport, Storage 

and Communications 

Medium 

200 

R26m 

R6m 


Small 

50 

R13m 

R3m 


Very Small 

20 

R3m 

R0.60m 


Micro 

5 

R0.20m 

RO.lOm 

Finance and Business 

Services 

Medium 

200 

R26m 

R5m 


Small 

50 

R13m 

R3m 


Very Small 

20 

R3m 

R0.50m 


Micro 

5 

R0.20m 

RO.lOm 

Community, Social 

and Personal Services 

Medium 

200 

R13m 

R6m 


Small 

50 

R6m 

R3m 


Very Small 

20 

Rlm 

R0.60m 


Micro 

5 

R0.20m 

RO.lOm 


32 




















































































DRAKENSTEIN 

MUNISIPAUTEIT • MUNICIPALITY • UMASIPALA 
Paarl | Wellington | Gouda I Saron | Simondium 


Funding and 
Reserves Policy 


www.drakenstein.gov.za 


A city of excellence 





TABLE OF CONTENTS 


2. DEFINITIONS.3 

3. PREAMBLE.4 

4. OBJECTIVES.5 

5. APPROVAL AND EFFECTIVE DATE.5 

6. POLICY AMENDMENT.5 

7. RELATIONSHIP WITH OTHER POLICIES.6 

8. REFERENCES.6 

9. PRINCIPLES REGARDING THE FUNDING OF THE ANNUAL BUDGET.7 

10. FUNDING THE OPERATIONAL BUDGET.7 

11. FUNDING THE CAPITAL BUDGET.10 

12. RESERVES.12 

13. PROVISIONS.12 

14. POLICY IMPLEMENTATION.13 


Abbreviations 


DM 

Drakenstein Municipality 

AO 

Accounting Officer 

ASB 

Accounting Standards Board 

CFO 

Chief Financial Officer 

CRR 

Capital Replacement Reserve 

GRAP 

Generally Recognised Accounting Practise 

IDP 

Integrated Development Plan 

MFMA 

Municipal Finance Management Act 

MSA 

Municipal Systems Act 

SDBIP 

Service Deliveryand Budget Implementation Plan 

VAT 

Value Added Tax 


Funding and Reserves Policy 


2 





























1. PURPOSE OF THE DOCUMENT 

This policy sets outs the principles for determining the following:- 

1.1 Projected billings, collections and all direct revenues; 

1.2 The provision for revenue that will not be collected; 

1.3 The funds the Municipality can expect to receive from investments; 

1.4 The proceeds the Municipality can expect to receive from the transfer or disposal of 
assets; and 

1.5 The funds to be set aside in reserves. 


2. DEFINITIONS 

In this Policy, unless the context otherwise indicates, a word or expression to which a 
meaning has been assigned in the Local Government: Municipal Finance Management 
Act, 2003 (Act No 56 of 2003), has the meaning so assigned, and: 

2.1 "Accounting Officer" - means the Municipal Manager and vice versa; 

2.2 "Act" - means the Local Government: Municipal Finance Management Act, 2003 (Act 
No. 56 of 2003); 

2.3 "Chief Financial Officer" - means an officer of the Municipality, designated by the 
Municipal Manager to be administratively in charge of the financial affairs of the 
municipality; 

2.4 "Council" or "Municipality" - means the Municipal Council of Drakenstein 
Municipality as referred to in Section 18 of the Municipal Structures Act; 

2.5 "Creditor" - in relation to a municipality, means any person or service provider to 
whom money is owing by the Municipality; 

2.6 "Debt" - means - 

2.6.1 A monetary liability of obligation created by a financing agreement, note, debenture, 
bond, overdraft or the issuance of municipal securities; or 


Funding and Reserves Policy 


3 




2.6.2 A contingent liability such as that created by guaranteeing a monetary liability or 
obligation of another. 

2.7 "Delegate" - means an official / person delegated to perform tasks on behalf of 
another person; 

2.8 "Financial Statement" - means statements consisting of at least - 

2.8.1 A balance sheet (statement of financial position); 

2.8.2 An income statement (statement of financial performance); 

2.8.3 A cash-flow statement; 

2.8.4 Any other statements that may be prescribed; and 

2.8.5 Any notes to these statements. 

3. PREAMBLE 

The Local Government: Municipal Finance Management Act No 56 of 2003 (hereafter 
MFMA) section 18 requires that an annual budget may only be funded from: 

3.1 Realistically anticipated revenues to be collected; 

3.2 Cash backed accumulated funds from previous years' surpluses not committed for 
other purposes; and 

3.3.1 Borrowed funds, but only for capital projects. 

3.3.2 Section 19 of the MFMA also requires spending on a capital project may only be 
commenced once the funding sources have been considered, are available and have 
not been committed for other purposes, 

3.3.3 The Local Government: Municipal Finance Management Act No 56 of 2003 Municipal 
Budget and Reporting Regulations, 2009 Section 8 requires that each Municipality 
should have a Funding and Reserves Policy. 


Funding and Reserves Policy 


4 




4. 


OBJECTIVES 


The objectives of the policy relating to funding and reserves are as follows: 

4.1 To comply with the legislative requirements; 

4.2 To ensure that the Municipality's Operating and Capital budgets are adequately 
funded; 

4.3 To ensure that the Municipality's provisions and reserves are maintained at the 
required levels, in order to mitigate unfunded liabilities in future financial years; and 

4.4 To achieve financial sustainability with acceptable levels of service delivery to the 
community. 


5. APPROVAL AND EFFECTIVE DATE 

The policy will be effective as from 1 July 2019. 


6. POLICY AMENDMENT 

The AO must- 

6.1 At least annually review the implementation of this Policy; and 

6.2 When the AO considers it necessary, submit proposals for the amendment of this 
Policy to the Council. 

6.3 The review of this policy and any amendment should be made with due consideration 
and in conjunction with the annual review of the budget related policies as prescribed 
in the Municipal Budget and Reporting Regulations, 2008. 


Funding and Reserves Policy 


5 




7. RELATIONSHIP WITH OTHER POLICIES 

This policy needs to be read in conjunction with other relevant adopted policies of the 
municipality, including the following: 

7.1 Accounting Policy; 

7.2 Cash Management and Investment Policy; 

7.3 Long Term Financial Sustainability Policy; 

7.4 Long Term Financial Plan (Chapter 5 of IDP); 

7.5 Prioritisation model for Capital Assets Investment; and 

7.6 Borrowing policy. 

8. REFERENCES 

The following references were observed in compiling this document: 

8.1 Municipal Finance Management Act, 2003; 

8.2 Municipal Systems Act, 2000; 

8.3 Municipal Structures Act, 1998; 

8.4 Accounting Standards Board; 

8.5 MFMA Budget Circulars; 

8.6 Municipal Budget and Reporting Regulations, 2008; 

8.7 Government Gazettes (30013 & 31021); and 

8.8 Generally Recognised Accounting Practice. 


Funding and Reserves Policy 


6 





9. 


PRINCIPLES REGARDING THE FUNDING OF THE ANNUAL BUDGET 


9.1 An annual budget may only be funded from:- 

9.1.1 Realistically anticipated revenues to be collected; 

9.1.2 Cash backed accumulated funds from previous years surpluses and reserves not 
committed for any other purpose; and 

9.1.3 Borrowed funds but only for the capital budget. 

9.2 Realistic anticipated revenue projections must take into account:- 

9.2.1 Projected revenue for the current year based on collection levels to date; and 

9.2.2 Actual revenue collected in previous financial years. 

9.3 Spending on a capital project may only occur if:- 

9.3.1 The money for the project, excluding the cost of feasibility studies, has been 
appropriated in the budget; 

9.3.2 The project, including the total cost, has been approved by Council; 

9.3.3 The sources of funding have been considered and have not been committed for other 
purposes; 

9.3.4 Council has considered:- 

(a) The projected cost covering all financial years until the project is operational; and 

(b) The future operations costs and revenue on the project, including municipal tax 
and tariff implications. 

10. FUNDING THE OPERATIONAL BUDGET 

10.1 The operating budget provides funding to departments for their medium term 
expenditure as planned. 

10.1.1 The Municipality categorises services rendered to the community according to its 
revenue generating capabilities as follows:- 

(a) Trading services (services that generate predetermined surpluses that can be 
used to fund other services rendered by the Municipality); 


Funding and Reserves Policy 


7 




(b) Economic services (services that should at least break-even, but do not 
necessarily generate any surpluses to fund other services rendered by the 
Municipality); and 

(c) Rates and General (services that are funded by property rates, government 
grants or surpluses generated by the trading services). 


10.2 The operating budget is funded from the following main sources of revenue:- 

10.2.1 Property rates; 

10.2.2 Service charges; 

10.2.3 Government grants and subsidies; 

10.2.4 Other sundry revenue, such as fines, interest received etc.; and 

10.2.5 Cash backed accumulated surpluses from previous years not committed for any other 
purposes. 


10.3 The following guiding principles apply when compiling the operating budget:- 

10.3.1 The annual budget must be cash backed; 

10.3.2 Growth parameters must be realistic taking into account the current economic 
conditions; 

10.3.3 Tariff adjustments must be realistic, taking into consideration affordability, bulk 
increases and future projected growth according to the approved Integrated 
Development Plan (IDP); 

10.3.4 Revenue from government grants and subsidies must be in line with allocations 
gazetted in the Division of Revenue Act and Provincial Gazettes; 

10.3.5 Revenue from public contributions, donations or any other grants may only be 
included in the budget if there are acceptable documentation that guarantees the 
funds such as:- 

(a) A signed service level agreement; 

(b) A contract or written confirmation; or 

(c) Any other legally binding document. 

10.3.6 Property rates are levied according to the Municipal Property Rates Act and Property 
Rates Policy based on the market values. The budget is compiled using the latest 
approved Valuation Roll and any Supplementary Roll, consistent with current and past 


Funding and Reserves Policy 


8 




trends. Property rates tariffs and rebates are determined annually as part of the tariff 
setting process; 

10.3.7 Property rates rebates, exemptions and reductions are budgeted either as revenue 
foregone; 

10.3.8 Projected revenue from service charges must be realistic based on current and past 
trends with expected growth considering the current economic conditions. The 
following factors must be considered for each service:- 

10.3.9 Metered services comprising of electricity and water:- 

(a) The consumption trends for the previous financial years; 

(b) Envisaged water restrictions or load shedding when applicable; and 

(c) Actual revenue collected in previous financial years. 

10.3.10 Refuse removal services:- 

(a) The actual number of erven receiving the service per category; and 

(b) Actual revenue collected in previous financial years. 

10.3.11 Sewerage services:- 

(a) The actual number of erven receiving the service per category and the size per 
erven, per category; and 

(b) Actual revenue collected in previous financial years. 

10.3.12 Rebates, exemptions or reductions for service charges are budgeted either as 
revenue foregone; 

10.3.13 Other projected revenue is charged in terms of the approved sundry tariffs and fines 
considering the past trends and growth for each category. 

(a) Provision for revenue that will not be collected is made against the expenditure 
item debt impairment and is based on actual collection levels and taking into 
account factors such as ownership, reconnections and type of debtors. 

10.3.14 Transfers from the accumulated surplus to fund operating expenditure will only be 
allowed for specific once-off projects and with no recurring operating expenditure 
resulting thereof. 

10.3.15 Interest received from actual long-term and or short-term investments are based on 
the amount reasonably expected to be earned on cash amounts available during the 
year according to the expected interest rate trends. 


Funding and Reserves Policy 


9 




10.3.16 Depreciation charges are fully budgeted for according to the asset register and to 
limit the impact of the implementation of Asset Related GRAP Standards a transfer is 
made from the accumulated surplus. 

10.3.17 To ensure the health of the municipal asset base, sufficient provision must be made 
forthe maintenance of existing and infrastructure assets based on affordable levels 
as maintenance budgets are normally lower than the recommended levels. As a 
guiding principle repair and maintenance should constitute at least between 7% of 
total operating expenditure and should annually be increased incrementally until the 
required targets are achieved. 

10.3.18 Individual expenditure line items are to be revised each year when compiling the 
budget to ensure proper control over operating expenditure. Increases for these line 
items must be linked to the average inflation rate and macro-economic indicators 
unless a signed agreement or contract stipulates otherwise. 


11. FUNDING THE CAPITAL BUDGET 

11.1 The municipality's objective is to maintain, through proper maintenance and 
replacement measures, existing levels of service and to improve and implement 
services which are neglected or non - existent. In order to achieve this objective the 
municipality must annually, within financial means, budget for the replacement of 
redundant assets as well as new assets. The capital budget provides funding for the 
Municipality's capital programme based on the needs and objectives as identified by 
the community through the Integrated Development Plan and provides for the 
eradication of infrastructural backlogs, renewal and upgrading of existing 
infrastructure, new developments and enlargement of bulk infrastructure. Provisions 
on the capital budget will be limited to availability of sources of funding and 
affordability. The main sources of funding for capital expenditure are:- 

11.1.1 Cash backed accumulated surpluses; 

11.1.2 Borrowings; 

11.1.3 Government grants and subsidies; 

11.1.4 Public donations and contributions; and 

11.1.5 Operating revenue. 

11.2 The following guiding principles apply when considering sources of funding for the 
capital budget:- 

11.2.1 Government grants and subsidies:- 


Funding and Reserves Policy 


10 




(a) Only gazette allocations or transfers as reflected in the Division of Revenue Act 
or allocations as per Provincial Gazettes may be used to fund projects (including 
unspent grants from prior years); 

(b) The conditions of the specific grant must be taken into consideration when 
allocated to a specific project; and 

(c) Government grants and subsidies allocated to specific capital projects are 
provided for on the relevant department's operating budget to the extent that 
the conditions will be met during the financial year. 

11.2.2 In the case of public contributions, donations and/or other grants, such capital projects 
may only be included in the annual budget if the funding is guaranteed by means of:- 

(a) A signed service level agreement; 

(b) A contract or written confirmation; and/or 

(c) Any other legally binding document. 

11.2.3 Public donations, contributions and other grants are provided for on the relevant 
department's operating budget to the extent that the conditions will be met during 
the financial year. 

11.2.4 The borrowing requirements as contained in the Borrowing Policy are used as a basis 
to determine the affordability of external loans over the Medium Term Revenue and 
Expenditure Framework. 

11.2.5 All capital projects have an effect on future operating budgets. The following cost 
factors should therefore be considered before approval:- 

(a) Additional personnel cost to staff new facilities once operational; 

(b) Additional contracted services, such as security, cleaning etc.; 

(c) Additional general expenditure, such as services cost, stationery, telephones, 
material etc.; 

(d) Additional other capital requirements to operate the facility, such as vehicles, 
plant and equipment, furniture and office equipment etc.; 

(e) Additional costs to maintain the assets; 

(f) Additional interest and redemption in the case of borrowings; 

(g) Additional depreciation charges; and 

(h) Additional revenue generation. The impact of expenditure items must be offset 
by additional revenue generated to determine the real impact on tariffs. 


Funding and Reserves Policy 


11 




12. RESERVES 


All Reserves are "ring fenced" as internal reserves within the accumulated surplus, 
except for provisions as allowed by the General Recognised Accounting Practices 
(GRAP). 

The following ring fenced reserves exist:- 

12.1 Capital Replacement Reserve 

Funding for capital budgets of future financial years are generated through 
contributions from the operating budget. Once the Municipality has reached its 
maximum gearing ability no further borrowings can be taken up. This necessitates that 
the Municipality also invests in a capital replacement reserve. 

This reserve once fully established will enable the Municipality to provide internal 
funding for its capital replacement and renewal programme. Other contributions to 
the capital replacement reserve through the operating budget may include interest 
received on investments. 

This reserve must be cash backed at all times to ensure the availability of cash to fund 
the municipal capital programme. 

12.2 Revaluation Reserve 

The surplus arising from the revaluation of land and buildings is credited to a non- 
distributable reserve. The revaluation surplus is realised as re-valued buildings are 
depreciated, through a transfer from the revaluation reserve to the accumulated 
surplus/ (deficit). On disposal, the net revaluation surplus is transferred to the 
accumulated surplus/ (deficit) while gains or losses on disposal, based on re-valued 
amounts are credited or charged to the Statement of Financial Performance. GRAP 17 
governs the reserve and accounting treatment thereof. 


13. PROVISIONS 

A provision is recognised when the municipality has a present obligation as a result of 
a past event and it is probable, more likely than not, that an outflow of resources 
embodying economic benefits or service potential will be required to settle the 
obligation and a reliable estimate can be made of the amount of the obligation. 

Provisions are revised annually and those estimates to be settled within the next 
twelve (12) months are treated as current liabilities. Only the amounts most probable 
to be paid in the next financial year will be taken into consideration for the purposes 
of a cash funded budget. Amounts to be estimated using historic information. 


Funding and Reserves Policy 


12 




The municipality has the following provisions: 


13.1 LeaveAccrual 

Liabilities for annual leave are recognised as they accrue to employees. An annual 
provision is made from the operating budget to the leave provision. 

13.2 Landfill Rehabilitation Provision 

The landfill site rehabilitation provision is created for the current operational site at 
the future estimated time of closure. The value of the provision is based on the 
expected future cost to rehabilitate the landfill site. 

13.3 Provision for Long Service Awards 

Municipal employees are awarded leave days according to years in service at year end. 
Due to the fact that not all long service leave balances are redeemed for cash. 

Long service awards can be encashed at the discretion of the Municipal Manager and 
will be subject to the cash flow position of Council. 

13.4 Provision for Post-Employment Medical and Ex-Gratia Benefits 

The municipality provides retirement medical care benefits by subsidizing the medical 
aid contributions to retired employees and their legitimate spouses. The entitlement 
to retirement medical benefits is based on employees remaining in service up to 
retirement age and the completion of a minimum service period. The expected cost of 
these benefits is accrued over a period of employment. 

14. POLICYIMPLEMENTATION 

This policy will effective as from 1 July 2019. 


Funding and Reserves Policy 


13 





DRAKENSTEIN 

MUNISIPAUTEIT • MUNICIPALITY • UMASIPALA 
Paarl | Wellington | Gouda I Saron | Simondium 


Electricity Department 
Maintenance Policy 


www.drakenstein.gov.za 


A city of excellence 





TABLE OF CONTENTS 


1. EXECUTIVE SUMMARY.3 

2. OBJECTIVE OF DRAKENSTEIN ELECTRICAL MAINTENANCE POLICY.3 

3. BACKGROUND.4 

4. ABBREVIATIONS.5 

5. DEFINITIONS.6 

6. STATUTORY AND REGULATORY FRAMEWORK.9 

7. COMPILATION OF MAINTENANCE MANAGEMENT PLANS.9 

8. ESTABLISH ASSET MAINTENACE OPERATIONS PLANS.9 

9. PREPARATION OF ASSET MAINTENANCE BUDGETS.11 

10. ESTABLISHMENT OF AN ASSET MAINTENANCE ORGANISATIONAL STRUCTURE.12 

11. ESTABLISHMENT OF ASSET MAINTENANCE SYSTEMS.12 

12. ESTABLISHMENT OF ASSET MAINTENANCE PERFORMANCE INDICATORS AND 

REPORTING MECAHNISMS.12 

13. ELECTRICITY NETWORK.13 

14. NORMATIVE REFERENCES.13 

15. REFURBISHMENT.16 

16. CONSUMER REQUIREMENTS.17 

17. MAINTENANCE MANAGEMENT SYSTEM.19 


Maintenance Policy 


2 





















1. EXECUTIVE SUMMARY 

This document sets out the Electrical Maintenance Policy of the Drakenstein 
Municipality Electro Technical Department Assets. 

This policy is prepared in a format and content to align it with both: 

1.1 The NERSA license conditions; and 

1.2 The recommended "National Rationalized Specification NRS 082:2014 developed to 
address all statutory requirements, the planned maintenance of all electrical related 
assets, and ensure a safe environment for operators and public. 

It shall support the integrated asset management platforms, linking geographic 
information, asset age, reliability, performance and financial systems, as and when 
these are developed and commissioned. 

The Policy will be supported by a Maintenance Plan comprising various separate 
documents compiled for specific activities, procedures, training, maintenance 
program frequencies, and interfaces with the integrated asset management software 
system. 


2. OBJECTIVE OF DRAKENSTEIN ELECTRICAL MAINTENANCE POLICY 

The objectives of the Drakenstein Maintenance Policy are; 

2.1 To ensure the proper maintenance of the Electricity Infrastructure assets of the 
municipality as captured in the Asset Register of Drakenstein Municipality; 

2.2 To benchmark the maintenance management approach of Drakenstein Municipality in 
the relevant Government guidelines; 

2.3 The policy will only apply to the ongoing maintenance of infrastructure assets, and 
excludes any capital renewal expenditure; 

2.4 The policy will be reviewed annually; 

2.5 The policy will be implemented in a phased manner; 

2.6 To optimize the maintenance of the electricity distribution network assets for a 
minimum lifecycle cost; 

2.7 To ensure a sustainable delivery of the services to the communities; 

2.8 To protect the Council's capital investment; 


Maintenance Policy 


3 




2.9 To enhance the reliability of the network; 

2.10 To avoid costly power outages; 

2.11 To meet requirements of consumers, internal stakeholders and legal authorities; 

2.12 To comply with the obligations under which this authority is licensed to operate the 
electricity networks in its licensed distribution area; 

2.13 To ensure that the policy document is aligned with the recommendations of the 
national Rationalized Specification NRS 082:2014 Recommended Maintenance Policy 
for Electricity Networks. 

3. BACKGROUND 

3.1 The Asset Management Policy of Drakenstein Municipality describes the procedure for 
the: 

(a) Proper recording of assets from authorisation to acquisition and to subsequent 
disposal, 

(b) Providing for safeguarding procedures, 

(c) Setting proper guidelines as to authorised utilisation, 

(d) And prescribing for proper maintenance. 

3.2 Paragraph 11.20 of the Asset Management Policy also states that "Every director shall 
be directly responsible for ensuring that all assets are properly maintained and in a 
manner which will ensure that such assets attain their useful operating lives" 

3.3 Whilst the policy therefore captures a mandate for the maintenance of the 
infrastructure assets of the municipality, there is a need to further articulate this 
mandate based upon leading practice and applicable Government guidelines. 

3.4 This maintenance management policy therefore represents the approach to be 
followed bythe Directorate Infrastructure. 


Maintenance Policy 


4 




4. 


ABBREVIATIONS 


Term 

Description 

CMMS 

Computerised Maintenance Management System 

DPLG 

Department of Provincial & Local Government, now the Department of 
Cooperative Government and Traditional Affairs (COGTA) 

EAM 

Enterprise Asset Management System 

EMIS 

Consumer Complaints System 

IEC 

International Electrical Commission 

IIMM 

International Infrastructure Management Manual (2006) 

HV 

Voltage equal or greater than 44 kV AC 

KPI 

Key Performance Indicator 

LV 

Network Voltage between 50 and 1000V AC 

MFMA 

Municipal Finance Management Act 

MTBF 

Mean time between failures (for a particular type of item) 

MV 

Network Voltage greater than 1000V AC and less than 44 kV AC 

MTTR 

Mean time to repair (for a particular type of item) 

NIMS 

National Infrastructure Maintenance Strategy 

O&M 

Operation and maintenance 

OEM 

Original equipment manufacturer 

QA 

Quality assurance 

RCM 

Reliability centred maintenance 

SOP 

Safe operating procedure or standard operating procedure 


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5. 


DEFINITIONS 


Term 

Description 

Asset Life- 

Cycle 

The cycle of activities that an asset goes through - including 
planning, design, initial acquisition and/or construction, cycles of 
operation and maintenance and capital renewal, and finally 
disposal. 

Availability 

The proportion of total time that an asset is capable of performing 
its intended functions. 

Benchmarking 

The process of comparing the performance of Drakenstein 
Municipality with other municipalities, as well as leading practice 
in order to identify performance gaps. 

Competent 

person 

Person who is able to carry out the designated functions 

Condition- 
based / 

predictive 
maintenance 

Maintenance performed as a result of the condition of an asset. 
Condition based maintenance is a planned maintenance activity. 

Condition- 

based 

maintenance 

Maintenance done based on information from tests which predict 
when maintenance is necessary, rather than on time in service or 
number of operations 

Corrective 

maintenance 

Maintenance actions performed as a result of failure of an asset 
including the modification or re-design of the asset. 

Corrective 

maintenance 

maintenance carried out after fault recognition and intended to 
put an item into a state in which it can perform a required function 
(IEC) 

Deferred 

maintenance 

Maintenance activities that is postponed with valid reason.. 

Inspection 

Visual or audible (or both) examinations that can be assisted by 
mechanical or electrical (or both) means, that will detect obvious 
unsatisfactory conditions or discrepancies (IEC modified) 

Item 

Any part, component, device, subsystem, functional unit, 
equipment or system that can be individually considered (IEC) 

Life cycle cost 

Net present value of the sum of all the direct and indirect costs 
incurred to acquire, install, commission, operate, maintain, 
decommission and dispose an item throughout its life 

NOTE The maintenance component of the life cycle cost should 
include the costs of risk, spares, labour, maintenance facilities and 
equipment, transport, site establishment and any special training. 


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Term 

Description 

Life cycle items 

Primary items and all other network items which together account 
for 80 % of the sum of all life cycle costs 

Maintenance 

All actions necessary for retaining an asset as near as possible to 
its original condition, excluding rehabilitation or renewal. 

Maintenance 

Combination of all technical and administrative actions, including 
supervision actions, intended to retain an item in, or restore it to, 
a state in which it can perform a required function (IEC) 

Maintenance / 
Refurbishment 

Actions that will restore or maintain the originally assessed future 
economic benefits or service potential that an entity can expect 
from an asset and is necessary for the planned life to be achieved. 

Maintenance 

philosophy 

System of principles for the organization and execution of the 
maintenance (IEC) 

Maintenance 

plan 

Information, policies and procedures for the optimal maintenance 
of an asset or group of assets 

Maintenance 

policy 

General approach to the provision of maintenance and 
maintenance support based on the objectives and policies of 
owners, users and customers (IEC) 

Maintenance 

standards 

The standards set for the maintenance service, usually contained 
in preventative maintenance schedules, operation and 
maintenance manuals, estimating criteria, statutory regulations 
and mandatory requirements, in accordance with the 
maintenance outcomes. 

Modifications 

from 

manufacturers 

Changes made to an item to incorporate developments after 
manufacture 

Operation 

The process of utilising an asset which will consume resources such 
as manpower, energy, chemicals and materials. 

Overhaul 

Work done with the objective of repairing or replacing parts which 
are found to be out of tolerance by inspection, tests, examination, 
or as required by the manufacturer's maintenance manual, in 
order to restore the item to an acceptable condition 

Planned 

maintenance 

Planned maintenance falls into three categories: 

1. Periodic - Activities necessary to ensure the reliability or to 
sustain the design life of an asset. This includes the regular 
services required for certain assets. 

2. Predictive - Condition monitoring activities used to predict 

failure 

3. Preventative - Maintenance that can be initiated without 

routine or continuous checking and is not condition-based. 


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Preventive 

maintenance 

Maintenance carried out at predetermined intervals or according 
to prescribed criteria and intended to reduce the probability of 
failure or the degradation of the functioning of an item (IEC) 

Pure risk 

Risk which results only in loss, damage, disruption or injury with 
no potential for gain, profit or other advantage 

Redundancy 

Existence of more than one means for performing a required 
function (IEC) 

Refurbishing 

Reinstatement of items to their original condition and intended 
performance with consideration for cost and current technology 
forthe purpose of extending the plants useful life expectancy 

Relia bility 
Centred 

Maintenance 

A structured process to determine the maintenance strategies 
required for an asset to ensure that it continues to fulfil its 
intended functions within the current operating context. 

Repair 

That part of corrective maintenance in which manual actions are 
performed on the item 

Retrofit 

Modifications done to an item to incorporate improvements in 
design to ensure enhanced operating performance 

Risk 

Chance of loss, or the probability that an undesired event may 
occur, multiplied by the cost of that event if it does occur 

Risk 

management 

Managerial function which has the objective of protecting people, 
assets and profits of a business, by eliminating or minimizing the 
potential for loss from pure risk and the provision of funds to 
recover from losses that do occur 

Routine 

maintenance 

Day-to-day operational activities to keep the asset operating and 
which form part of the annual operating budget. 

Routine test 

Activity to determine the status, calibration and functionality of an 
asset or component of an asset 

Run-to-Failure 

A maintenance strategy where no routine maintenance is 
performed and the asset is used until it fails. 

or 

Failure of an item, which has intentionally not been subject to 
preventive maintenance 

Service 

maintenance 

Service undertaken seasonally or annually to enable the required 
level of service to be delivered. Service maintenance is a type of 
planned maintenance activity. 

Unplanned 

maintenance 

Corrective work required in the short-term to restore an asset to 
a working condition. 


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6 . 


STATUTORY AND REGULATORY FRAMEWORK 


6.1 In addition to the Statutory and Regulatory Framework contained in the Asset 
Management Policy, the following documents are relevant, and were used as key 
inputs for this policy: 

(a) MFMA Local Government Capital Asset Management Guideline published by 
the National Treasury Department (2008). 

(b) DPLG "Guidelines for Infrastructure Asset Management in Local Government" 
(2007). 

(c) NIMS, approved by the National Cabinet (2006). 

(d) International Infrastructure Management Manual co-authored by Institute of 
Municipal Engineering of Southern Africa IMESA (2006). 

6.2 The Occupational Health and Safety Act (Act 85 of 1993) and regulations shall be 
complied with. 

6.3 NERSA - National Energy Regulator. 

6.4 Distribution License. 

7. COMPILATION OF MAINTENANCE MANAGEMENT PLANS 

7.1 In terms of the Maintenance Management Policy, Maintenance Management 
Plans will be compiled for all services included under the policy. The maintenance 
Management Plans will address the following 5 aspects: 

(a) Establishment of asset maintenance operational plans, 

(b) Preparation of asset maintenance budgets, 

(c) Establishment of an asset maintenance organisational structure, 

(d) Establishment of asset maintenance systems, 

(e) Establishment of asset maintenance performance norms and standards and 
reporting mechanisms. 

7.2 Sections 7 to 11 provide details of the contents of the Maintenance Management Plans 
for each of the above 5 aspects. 

8. ESTABLISH ASSET MAINTENANCE OPERATIONAL PLANS 

8.1 Asset maintenance operational planning will be undertaken for all assets covered by 
this policy with due consideration of the following: 

(a) Definition of maintenance outcomes 

(b) Conducting a maintenance analysis for all infrastructure assets, including: 


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(i) Identification of all assets 

(ii) Identification of critical assets based upon the risk of failure to the 
municipality 

(ii) Analysing the maintenance options and determining the preferred 
option in terms of the lowest life-cycle cost. 

(c) Development and implementation of a maintenance operational plan. 

(d) Analysis of asset performance 

8.2 Maintenance outcomes 

(a) Maintenance outcomes must be agreed and documented for every service. 

(b) The maintenance outcomes must be documented for each of the following 

categories: 

(i) Statutory compliance, e.g. adherence with outflow quality 

requirements. 

(ii) Availability of the service, e.g. time taken to restore service after a 
disruption. 

(iii) Reliability of the service, e.g. the number of times within a period that 
consumers do not have access to the service. 

(iv) Cost of maintenance. 

(v) Risk management. 

(c) The maintenance outcomes defined will be based upon various documents 

adopted by Drakenstein Municipality, such as the various Consumer Service 

Charters. 

(d) Main Identification of assets 

(i) The existing infrastructure asset register will be used as the basis for the 
identification of all assets, and care will be taken to update the register 
to reflect any new assets created, retired or changed in any way. 

(ii) Assets will be grouped into categories for which the maintenance 
actions are similar. 

(e) Identification of critical assets based upon the risk of failure to the municipality 

(i) Assets will be evaluated to determine the consequence of failure with 
regards to the following impacts: 

(ii) Environmental impact, 

(iii) Public health & safety impact 

(iv) Financial impact 

(v) Service delivery impact 

(vi) The impact with regards to each of the criteria will be rated using a 5 
point scale. 


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(vii) The individual ratings will be combined into a combined rating, which 
will be used to identify the relative criticality of maintaining specific 
assets. 

(f) Analysing the maintenance options and determining the preferred option in 
terms of the lowest life-cycle cost. 

(i) A maintenance strategy will be selected for each of the asset groups 
defined in 7.3 (a) 2. 

8.3 Maintenance operational plan development 

(a) The maintenance activities for each asset group defined will be combined in an 
activity maintenance plan that will list the following: 

(i) Description of the asset in sufficient detail for the accurate 
identification of the asset. 

(ii) The criticality of the activity. 

(iii) The base period of the activity, e.g. monthly, annually etcetera. 

(b) Maintenance activities recorded in existing documents of Drakenstein 
Municipality will be incorporated into the activity list. These include: 

(i) Activities recorded in current checklists and operating manuals 

8.4 Analysis of asset performance. 

(a) Drakenstein Municipality will use tools to monitor the performance of assets, 
where it is appropriate for such tools to be employed. These could include: 

(i) Root Cause Analysis tools to assess the underlying reasons for asset 
failure. 

(ii) Undertaking Reliability Maintenance assessments. 

9. PREPARATION OF ASSET MAINTENANCE BUDGETS 

9.1 The costs associated with the maintenance activities in the maintenance activity 
plan must be calculated. 

9.2 The individual maintenance activity costs must be summarised per department and 
used to inform the required maintenance budgets. 

9.3 Where available maintenance budgets are inadequate the criticality of the 
individual activities will be used to prioritise the maintenance actions to be 
performed. 


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9.4 Maintenance activities that cannot be funded will be classified as deferred 
maintenance and recorded as such. 

9.5 Expenditure on maintenance will be recorded against the assets, facilities and cost 
centres where the cost is incurred. 

10. ESTABLISHMENT OF AN ASSET MAINTENANCE ORGANISATIONAL STRUCTURE 

10.1 The maintenance activity schedule will be used to inform the maintenance 
organisational structure required to perform the critical work to be executed. 

10.2 The maintenance activity schedule will also be used as the basis to determine the tools 
and other equipment required to perform the required maintenance. 

10.3 The outsourcing or use of alternative delivery mechanisms to perform maintenance 
tasks, or groups of maintenance tasks, must be considered as an alternative for the 
creation of in-house capacity. 

11. ESTABLISHMENT OF ASSET MAINTENANCE SYSTEMS 

11.1 The maintenance activities will be scheduled and controlled using an appropriate 
system(s), such as a CMMS. 

11.2 The maintenance system(s) must include the following functionality 

(a) Recording of progress against activities and activities closed or re-programmed 

(b) Recording of maintenance costs, time and other resources consumed against assets 
and facilities. 

(c) Include links to the financial management system so that reconciliation of 
maintenance budgets can be done. 

(d) Built-in maintenance analysis tools or ability to export information to other 
applications, to enable maintenance analyses to be undertaken. 

(e) Analysis of asset performance to be used as an input to maintenance planning. 

11.3 A link will be established between the maintenance management system and the 

consumer complaints system (EMIS), which is one of the main originating points for 
unplanned maintenance activities. 

12. ESTABLISHMENT OF ASSET MAINTENANCE PERFORMANCE INDICATORS AND 
REPORTING MECHANISMS 

(a) Appropriate KPI's will be identified and used to monitor the maintenance performance 
of Drakenstein Municipality. 

(b) The maintenance management KPI's will be drawn from the Service Delivery & Budget 
Implementation Plan and Performance Management System of Drakenstein 
Municipality, where possible. 


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(c) The network performance is annually reported to NERSA and considered for 
compliance with terms of the Electricity Distribution License of Drakenstein 
Municipality. 

13. ELECTRICITY NETWORK 

13.1 DESCRIPTION 

The Drakenstein Electricity Network comprises of: 

(a) 66 kV and 11 kV intakes from Eskom. 

(b) 66kV and llkV electricity distribution networks and plant in the licensed distribution 
area. 

Eskom networks in Drakenstein Municipal Area: 

(a) Eskom supplies large areas of Rural Drakenstein and the hamlets of Gouda, Hermon 
and Saron. This is excluded. 

13.2 INFRASTRUCTURE 

The network comprises of: 

(a) Overhead lines (HV, MV, LV) 

(b) Underground Cables (HV, MV, LV) 

(c) Transformers (HV/MV, MV/LV) 

(d) Mechanical Switchgear (Primary and secondary) 

(e) Street Lighting 

(f) Monitoring and control equipment 

(g) Essential services Standby Generator installations. 


14. NORMATIVE REFERENCES 

The following documents are referenced in NRS 082:2014-Recommended Maintenance 
Policy for Electricity Networks. 


Document 

Description 

NER Power 

Quality 

Directive; 

The NER Power Quality Directive was developed by the National 
Electricity Regulator and is available on their website www.nersa.org.za 

NRS 047-1 

Electricity supply - Quality of service. - Part 1: Minimum standards. 

NRS 047-2 

Electricity supply - Quality of service. - Part 2: Reporting guidelines 


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Document 

Description 

NRS 048-2 

Electricity supply - Quality of supply - Part 2: Voltage characteristics, 
compatibility levels, limits and assessment methods 

NRS 048-4 

Electricity supply - Quality of supply - Part 4: Application practices for 
licensees 

NRS 048-6 

Electricity supply - Quality of supply - Part 6: Measurement and 
reporting of medium voltage network interruption performance 

NRS 048-7 

Electricity supply - Quality of supply - Part 7: Application practices for 
end-customers 

NRS 048-8 

Electricity supply - Quality of supply - Part 8: Measurement and 
reporting of extra high voltage (EHV) and high voltage (HV) network 
interruption performance 

NRS 048-9 

Electricity supply - Quality of supply - Part 9: Load reduction practices, 
system restoration practices, and critical load and essential load 
requirements undersystem emergencies. 

NRS 089-1 

Maintenance of electricity networks - Part 1: Underground distribution 
systems 

NRS 089-2-1 

Maintenance of electricity networks - Part 2: Overhead distribution 
systems -Section 1: Overhead power lines. 

NRS 089-2-2 

Maintenance of electricity networks - Part 2: Overhead distribution 
systems -Section 2: Inspection and supplemental treatment of treated 
wood utility poles 

NRS 089-2-3 

Maintenance of electricity networks - Part 2: Overhead distribution 
systems -Section 3: The manual replacement of a rotten wooden pole 
structure 

NRS 089-2-4 

Maintenance of electricity networks - Part 2: Overhead distribution 
systems -Section 4: Clearing and maintenance of servitude roads. 

NRS 089-2-5 

Maintenance of electricity networks - Part 2: Overhead distribution 
systems -Section 5: Insulators 

NRS 089-3-1 

Maintenance of electricity networks - Part 3: Substations - Section 1: 
General 

NRS 089-3-2 

Maintenance of electricity networks - Part 3: Substations - Section 2: 
Power transformers, circuit-breakers, isolators and instrument 
transformers 

NRS 089-3-3 

Maintenance of electricity networks - Part 3: Substations - Section 3: 
Miniature substations, distribution transformers and electrical 
enclosures. 

NRS 089-4 

Maintenance of electricity networks - Part 4: Control technology. 


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Document 

Description 

NRS 089-5-1 

Maintenance of electricity networks - Part 5: Street lighting and high 
masts -Section 1: Maintenance of street lighting and high masts. 

SANS 14001 

Environmental management systems - Specification with guidance for 

use 

SABS 

ARP5:2010/IWA 

5:2006 

Emergency preparedness 


14.1 SUPPORTING DOCUMENTATION 

The supporting documentation shall be established by the department. 

(a) A set of Safe Operating/Standard Operating Procedures (relating to activities). 

(b) Inspection sheets aligned to the different assets groups or installations. 

(c) Maintenance program/Schedule. 

(d) OEM equipment operating and maintenance manuals. 

14.2 SUPPORTING ASSET MANAGEMENT SOFTWARE 

The Electrical Asset Management (EAM) software will be set up to capture all assets, 
values, service life, maintenance plans, Operating Procedures. It will also generate the 
relevant works orders for planned maintenance. 

The municipal resources include an installation of the Maximo Enterprise Asset 
Management (EAM) Software. 

14.3 MAINTENANCE PHILOSOPHY 

Planned / Preventative Maintenance 

“Maintenonce carried out at predetermined intervals or according to prescribed 
criteria and intended to reduce the probability of failure or the degradation of the 
functioning ofan item" 

This practise will be the default for medium- and high voltage switchgear, lines and 
cables, terminations battery chargers, protection relays, fire extinguishers, substation 
grounds and surrounds as well as servitudes. 

Planned maintenance will be scheduled to maintain the equipment/installation in a 
condition of maximum availability of service. 

Condition based maintenance will be based on scheduled inspection plans and lists. 
Predetermined maintenance will be based on a given service schedule. 

Both activities will comprise of cleaning, lubrication, adjustment, calibration, repair 
refurbishment or replacement as appropriate to the equipment or plant. 

15. REFURBISHMENT 


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"Reinstatement of items to their originai condition and intended performance with 
consideration of cost and current technology for the purpose of extending the plants 
useful life" 

Where it is considered cost effective and practical, the plant/equipment may be 
refurbished to extend its useful life. Due regard shall be given to the frequency of 
failures that the plant is experiencing. HV and MV switchgear are the most likely to be 
refurbished. 

This would include the replacement of parts found to be worn or failed and affecting 
the prime function of the equipment. 

15.1 UNSCHEDULED / CORRECTIVE MAINTENANCE 

Unscheduled maintenance shall be done in the event of an unplanned failure, to return 
the equipment or plant to service as soon as necessary, but according to either of the 
following. 

(a) Immediate maintenance shall be done and the equipment or plant returned to service. 

(b) Deferred maintenance may be done if the plant / equipment can be safely returned to 

service for later scheduled maintenance. The need for service shall be escalated and 
tracked for earliest possible corrective action. 

15.2 MAINTENANCE PLANNING 

Maintenance plans will be developed to meet the requirements of this policy. The 
plans will contain details of: 

(a) Inspections and record keeping; 

(b) Frequency and time based schedules; 

(c) Be equipment specific; and 

(d) Identify standard procedures. 

(e) Cost and resource budget and reconciliation ( supported through the EAM system) 
Maintenance plans shall only be approved by the Competent Person. 

The maintenance frequency, activities, schedules, as approved; will be managed through the 
Maximo enterprise management system 

15.3 MAINTENANCE WORK 

Maintenance of electricity delivery networks shall only be performed by designated 
competent persons in terms of the departmental procedures as established in terms 
of paragraph 0 

15.4 LEGAL REQUIREMENTS 

The following acts and regulations of the Republic of South Africa shall apply. 


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(a) The Occupational Health and Safety Act, Act 85 of 1993 and Regulations. 

(b) The General Machinery Regulations 1988 (GMR) incorporated in the OHS Act. 

(c) Written appointments of the Competent Person in terms of the GMR, regulation 2(1) 

(d) Appointment of Authorised persons, conversant with the dangers and precautionary 
measures relating to the operation of machinery (regulation 4). 

(e) Operation of machinery (Regulation 4). 

(f) The Electrical Machinery Regulations (EMR) as amended. 

(g) The General Safety Regulations 1986 (as amended) 

(h) The following document shall be used for training and assessment of authorised 
persons for high voltage switching and operations. 

(i) The Operating Regulations For High Voltage System (ORHVS) -Eskom controlled 
Document. 

16. CONSUMER REQUIREMENTS 

The service levels of the electrical services shall be as agreed with the consumer in 
accordance with the NER Power Quality Directive. 

It shall be specific to consumer and service areas and be subject to constraints 
identified in the system. 

The quality of supply shall be defined in terms of the relevant part of NRS 047. 

The service levels shall be defined in terms of the relevant part of NRS 048. 

Each individual consumer shall enter into a contract defining the above. 

All contracts/agreements shall be kept in a secure record system. 

16.1 LIFE CYCLE COSTING 

The requirement and scope of maintenance, selection of technology, energy losses or 
sales losses and spares/consumables relevant to any item shall be subject to a life cycle 
cost analysis and forecast. 

16.2 ENVIRONMENTAL MANAGEMENT 

All maintenance activities will be environmentally friendly and comply with SANS 
14001. 

Spills and leaks shall be reported to the relevant department for inspection, 
management and clean up. 

16.3 QUALITY MANAGEMENT 

A quality management system shall be established. 

16.4 RISK MANAGEMENT 


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The Electricity Department shall maintain risk management to ensure safe electrical 
distribution systems for public, animal life, operators and maintenance personnel. 

This shall include: 

(a) Risk assessment of operations, equipment and service loss. 

(b) Risk assessment before, during and on completion of maintenance work. 

(c) Risk assessment and safe procedures in planning and executing maintenance work. 

16.5 MODIFICATIONS AND RETROFITS 

The definition of NRS 082 is quoted. 

"Where substitutes are manufactured for items ofa critical nature, recognized reverse 
engineering technigues can be used to ensure the substitutes are at least equal in all 
essential respects to the original." 

Reverse engineered designs may not infringe on any patent rights. 

Reverse engineered items must be assessed for appropriateness of the design, 
including its function and operating conditions in the existing equipment. Where 
appropriate, designs, material selection and manufacture must be assessed by a 
qualified and competent person. 

Records of alternatives applied must be entered into the record of the affected plant, 
including design records where applicable, approval, warranties and date of 
implementation. 

Manufacturer's modification records for major plant or equipment shall be added to 
the asset data sheets for referral to, during maintenance and operation. 

16.6 AUDITING 

Any maintenance activity records may be audited for compliance. 

An audit frequency shall be prepared. 


17. MAINTENANCE MANAGEMENT SYSTEM 
17.1 INFORMATION SYSTEM 

The maintenance management system shall preferably be operated on an integrated 


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platform with other municipal functions. 


The maintenance management system must incorporate: 

(a) A database of plant assets and its relevant object parameters, including age, condition, 
expected life, 

(b) Work procedures and plans for maintenance by plant item, 

(c) Scheduling of maintenance and resources, 

(d) Cost forecasting and capturing / reconciliation. 

17.2 PERFORMANCE MONITORING 

Maintenance KPI's will be set for each group of plant orfunction to allow review of 
expectations and actual service levels. 

It should also support annual reporting data extraction for internal review and 
NERSA reporting. 

ASSET MAINTENANCE STRATEGIES 


Category 

Type 

Description 

Planned 

Periodic / preventative 
maintenance 

Regular programme of maintenance tasks 
(including inspections). Inspection and service 
frequency 

Condition based / 
predictive maintenance 

Maintenance based upon the condition of an 
asset. 

Service maintenance 

Regular servicing of assets, including services 
prescribed by the original manufacturer. 

Unplanned 

Priority repair 

Maintenance to restore the function of an asset 

that has failed. 

Run-to-failure or 

"Throw away" 

Assets where no maintenance is performed and 
the asset is discarded and / or replaced at the end 
of its life. 

Corrective maintenance 

Maintenance actions performed as a result of the 
failure of an asset based upon modifications and / 
or re-designs identified. 


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DRAKENSTEIN 

MUNISIPALITEIT • MUNICIPALITY • UMASIPALA 
Paarl | Wellington | Gouda I Saron | Simondium 


Gift Policy 


www.drakenstein.gov.za 


A city of excellence 





Table of Contents 


1. Definitions. 3 

2. Introduction. 3 

3. Scope of this policy. 4 

4. Legislative framework. 4 

5. Principles. 5 

6. Execution of this Policy.6 

7. Valuation of gifts. 7 

8. Declaration and recording of gifts. 7 

9. Reporting requirements for gift registers. 7 

10. Communication and circulation of this Policy.8 

11. Shorttitle.8 


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2 















1 . 


Definitions 


Benefit: Includes any tangible or intangible advantages or profits gained, such as tickets to sporting, 
theatrical or other events, invitations to lunches, dinners, promotions or travel. 

Corruption: The abuse of a position of employment by the offering or acceptance of a benefit that is 
not legally due, for the commission of an act in connection with that position of 
employment, as defined in the Prevention and Combating of Corrupt Activities Act, No 12 
of2004. 

Employee: Includes permanent employees, temporary employees, contract employees, fixed term 

contract employees of the municipality. 

Employee's Family: Includes the employee's spouse or life partner, sibling, parent, parents-in-law, 
grandparent, child, grandchild, adoptive parent and adoptive child. 

Gift: Includes the receipt of physical offerings, rewards, hospitality (including breakfasts, lunches, 

dinners), money, sponsorships, and commissions or any other benefit or gratification that is received 

by an employee in his or her official capacity but does not include: 

• The Municipality's own branded goods or items; 

• Official sponsored functions, promotions or hospitality events of the Municipality; and 

• Official donations made on behalf of the Municipality. 

Gratification: means gratification as defined under Section 1 of the Prevention and Combating of Corrupt 
Activities Act, 2004 (Act No 12 of 2004). 

The Municipality: Drakenstein Municipality. 

Supplier: Includes existing and potential vendors, contractors, sourcing partners, service 

providers, distributors, and consultants who supply goods or services to the municipality, 
as well as any other third parties who may in future become suppliers or vendors of goods 
or services to the municipality. 

2. Introduction 

The Municipality subscribes to the principles of good corporate governance, which requires 
conducting business in an honest and transparent manner. The Municipality is also committed in 
fighting fraudulent behaviour at all levels within the organization. Taking the aforesaid into 
account, it is of critical importance that all employees of the Municipality be informed of its 
position on the acceptance and offering of business courtesies, including gifts and rewards and 
that such business courtesy occurs within ethical standards as prescribed in legislation. 


Gift Policy 


3 




3. 


Scope of this policy 


This Policy applies to all employees of the Municipality. 

4. Legislative framework 

4.1 The purpose of this Policy is to regulate the declaration of offering of business courtesies and gifts 
received by employees of the Municipality. This Policy applies to all employees of the Municipality 
and must be read together with: 

4.1.1 Schedule 2 of the Local Government: Municipal Systems Act, 2000 (Act 32 of 2000) 
(Systems Act) and more specifically item 8 thereof which states that: 

(1) A staff member of a municipality may not request, solicit or accept any reward, gift or 
favour for - 

(a) Persuading the council of the municipality or any structure of functionary of the 
council, with regard to the exercise of any power or the performance of any duty; 

(b) Making a representation to the council, or any structure or functionary of the 
council; 

(c) Disclosing any privileged or confidential information; or 

(d) Doing or not doing anything within that staff member's power or duties. 

(2) A staff member must without delay report to a superior or to the speaker ofthe council 
any offer which, ifaccepted by the staff member would constitute a breach ofsub-item (1). 

4.1.2. The Municipality's Supply Chain Management Policy (the SCM Policy) and more specifically 
paragraph 47 thereof which states that; 

47(1) No person who is a provider or prospective provider of goods or services, or a 
recipient or prospective recipient of goods disposed or to be disposed of may 
either directly orthrough a representative or intermediary promise, offer or grant- 

(a) Any inducement or reward to the Drakenstein Municipality for or in 
connection with the award of a contract; or 

(b) Any reward, gift, favour or hospitality to - 

(i) Any official; or 

(ii) Any other role player involved in the implementation 
of this Policy. 


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(2) The Accounting Officer must promptly report any alleged contravention of 
subparagraph (1) to the National Treasury for considering whether the offending 
person, and any representative or intermediary through which such person is 
alleged to have acted, should be listed in the National Treasury's database of 
persons prohibited from doing business with the public sector. 

(3) Subparagraph (1) does not apply to gifts less than R 350 in value. 

4.1.3 the Municipality's Fraud Prevention Policy and more specifically paragraph 4 which states 

that: 

4.1.3.1 The Municipality's policy to fraud is zero tolerance. 

4.1.3.2 All fraud, corruption, theft, maladministration or any other dishonest 
activities of a similar nature will be investigated and followed up by applying the 
appropriate remedies and the full extent of the law. Appropriate prevention and 
detection controls must be developed and enforced. These include the existing 
financial and other controls and checking mechanisms as prescribed. 

4.1.3.3 This policy applies to all allegations, attempts and incidents of fraud 
impacting or having the potential to impact on the Municipality. 

4.1.3.4 The attempted fraud is treated as seriously as the accomplished fraud. 

5. Principles 

5.1 It is often standard business practice within the private sector to offer gifts and hospitality to 
current and potentially future clients. The acceptance of such gifts and hospitality may be accepted 
under certain conditions. 

5.2 Any acceptance of an offer of a bribe or a commission must however be viewed as illegal and may 
result in disciplinary and criminal action. 

5.3 Employees must take great care not to be placed in a situation where their actions might be 
construed to be improper, may indicate bias towards an organisation or person, or indicate 
favouritism towards any organisation or person. 

5.4 The acceptance of gifts or hospitality by employees should be the exception and not the rule. If 
doubt exists about the propriety of the gift or hospitality, then it must be refused by the employee. 


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5.5 The basis for remuneration of employees is their salaries and any allowances to which they might 
be entitled. This must not be supplemented by the acceptance of gifts or hospitality for the work 
that they perform. 

5.6 Under no circumstances should an employee of the Municipality attempt to solicit a gift from a 
supplier. 

5.7 An employee may receive a gift to the value of R 350 (incl VAT) per supplier per occasion. Any gifts 
in excess of this provision must be refused by the employee and not authorised by the respective 
authority. Gifts may only be retained by an employee after the delegated authority has authorised 
the acceptance thereof. 

5.8 In the event where a gift is received from a supplier which aims to benefit a number of employees, 
the value of the gift may be divided between the number of employees who benefits, subject to 
paragraph 5.7 of this Policy. 

6. Execution of this Policy 

6.1 The power of authority from granting permission vested in the City Manager with regards to the 
acceptance of gifts is delegated to the Executive Directors, Senior Managers and Managers of the 
employee concerned in respect of the following subject to paragraph 5.7 of this Policy: 

6.1.1 Invitations to business meals, provided it is done in a circumspect and responsible manner; 

6.1.2 Articles which displays the supplier's name, trade mark or logo and which are presented for 
advertising purposes. The acceptance of any articles on which supplier's name, trade mark 
or logo do not appear is also subject hereto; 

6.1.3 Invitations to sports meetings and sports events; and 

6.1.4 Tokens of appreciation for public appearances by an employee. In such circumstances, the 
gifts may be accepted and if possible, put on display at the workplace. 

6.2 Gifts (e.g. awards) received on behalf of the Municipality is excluded from this Policy. Any invitation 
to an occasion in an employee's official capacity may be accepted, but needs to be recorded in a 
separate register after approval by the City Manager. Invitations received by the City Manager must 
be recorded in the same register as stated above which must be approved by the Executive Mayor. 

6.3 Permission to accept gifts other than those contemplated under paragraph 6.1 of this Policy, must 
be obtained from the City Manager, subject to paragraph 5.7 of this Policy. 


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7. 


Valuation of gifts 


7.1 Gifts must recorded at a market related value. 

7.2 Should there be uncertainty with regards to the value of the gift, a value will be determined by the 
respective department's Executive Director and the Chief Financial Officer. 

8. Declaration and recording of gifts 

8.1 All employees, below the level of Executive Director, are required to declare the receipt of gifts in 
thegift register, held by the respective Executive Directors. 

8.2 The City Manager, the relevant Executive Director or senior manager / manager reporting directly 
to an executive director, shall decide whether an employee may retain a gift or not subject to 
paragraph 6.1. 

8.3 The format of the gift register will be determined by the Manager: Supply Chain Management. 

8.4 Employees reporting directly to Executive Director that is offered a gift must obtain their respective 
Executive Director's approval of acceptance for the gift. 

8.5 Executive Directors that receive a gift must obtain the City Manager's approval for acceptance of 
the gift. 

8.6 The City Manager that receive a gift must obtain the Executive Mayor's approval for acceptance of 
the gift. 

8.7 Employees must promptly record gifts in the gift register. 

8.8 The authority who approved or rejected the acceptance of a gift, must ensure that the gift register 
is properly completed. 

8.9 An employee that received a gift cannot approve the retention of that gift. 

9. Reporting requirements for gift registers 

9.1 Gift registers held by the respective departments must be submitted to the office of the Manager: 
Supply Chain Management on at least a bi-annual basis. 

9.2 The office of the Manager: Supply Chain Management will be responsible for collating all 
declarations made for audit purposes. 


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10. Communication and circulation of this Policy 

10.1 The Chief Financial Officer is responsible for the communication of this Policy to all employees of 
the Municipality and must ensure that the content hereof is included in induction sessions for new 
appointees. 

11. Short title 

11.1 This Policy is called the Drakenstein Municipality Gift Policy. 


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DRAKENSTEIN 

MUNISIPALITEIT • MUNICIPALITY • UMASIPALA 
Paarl | Wellington | Gouda I Saron | Simondium 


Stock Management 

Policy 


www.drakenstein.gov.za 


A city of excellence 





TABLE OF CONTENTS 


1. Background.3 

2. Objective.3 

3. Accountability.3 

4. Principles of Stock Management.3 

5. StockCounts.4 

6. Standard Operating Procedures and Instructions.5 

7. Valuation of Stock Items.5 

8. Damaged and Obsolete Stock Items.5 

9. Issuing and Storage of Stock Items.6 

10 Short Title.10 


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1 . 


Background 


1.1 The stores and stock management function shall be centralised and will operate under the 
control of the Manager: Supply Chain Management. 

1.2 The Manager: Supply Chain Management shall ensure proper financial control, uphold the 
principle of effective administration, proper stock holding and control, a high standard of service 
levels as well as product standardisation and ensuring good quality of products. 


2. Objective 

2.1 The aim of this policy is to ensure continued availability of materials for rendering services to the 
community, by following due processes and procedures that are consistent with Council's Supply 
Chain Management Policy and other applicable legal and policy frameworks. 


3. Accountability 

3.1 In accordance with section 62(l)(c) of the Municipal Finance Management Act (Act 56 of 2003), 
referred to as the MFMA, the accounting officer of the Municipality is responsible for managing 
the financial administration of the municipality and must for this purpose take all reasonable steps 
to ensure that the municipality has and maintains effective, efficient and transparent systems of 
financial and risk management and internal control. 


4. Principles of Stock Management 

4.1 The principles of stock management are as follows - 

4.1.1 Consolidation of stock items to avoid duplication and redundancy; 

4.1.2 Managing the stores in an efficient and cost effective manner; 

4.1.3 Managing and monitoring of stock levels; 

4.1.4 The setting of inventory levels that includes minimum and maximum levels and lead times 
wherever goods are placed in stock; 

4.1.5 Maintaining an effective item identification system; 


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4.1.6 Avoiding fruitless and wasteful expenditure by disposing redundant material on time; 

4.1.7 Designing and implementing internal control systems that seeks to ensure that the 
Municipality minimizes theft and avoidable losses; 

4.1.8 All stock items in the Stock System are coded to ensure that each item has a unique number 
for the purpose of monitoring spending patterns on types or classes of goods; 

4.1.9 Stock items are kept in clearly marked bins located in the store to enable ease of 
identification at all times; 

4.1.10 To prolong the life of stock items kept in the stores, the stores must be kept in a clean, 
safe, tidy and systematic condition that complies with the health and safety standards as 
applicable; 

4.1.11 Appropriate measures should be taken to minimise the risk associated with the keeping of 
stock items; 

4.1.12 Ordering and receiving of stock must be done in accordance with standard operating 
procedures and instructions; and 

4.1.13 To ensure that appropriate standards of internal controls and stock management are in 
place to ensure goods placed in the stores are secured and only used for the purpose it 
was purchased for. 


5. Stock Counts 

5.1 An annual formal stock count must be undertaken before the end of each financial year. A stock 
count report, indicating all discrepancies and further recommendations must be submitted to 
Council within two months after the end of the financial year. 

6. Standard Operating Procedures and Instructions 

6.1 The Manager: Supply Chain Management or his representative is hereby authorised to direct 
further instructions and standard operating procedures on the implementation of this policy to 
all relevant officials. 


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6.2 Any non-compliance to this policy or any standard operating procedure or any instruction given in 
terms of this policy shall result in preliminary investigations and if needed the institution of 
disciplinary procedures in terms of the Collective Agreement on the Disciplinary Procedures Code. 


7. Valuation of Stock Items 

7.1 In terms of GRAP 12 stock items are valued at the lower of cost by using the first-in-first-out (FIFO) 
cost basis or net realisable value (NRV) and are recorded exclusive of VAT. 


8. Damaged and Obsolete Stock Items 

8.1 Stock items that are periodically identified as being damaged must be reported on by the 
Administrator: Stores as to effect the necessary financial system adjustments. 

8.2 On an annual basis damaged and obsolete stock items will be identified as part of the annual stock 
count process. Such items will be reported on to Council together with appropriate 
recommendations. 


9. Issuing and Storage of Stock Items 

9.1 Stock items will be taken up in the Stock System and issued from the Stock System as per the 
approved Standard Operating Procedures for stock management. 

9.2 Stock items will not be issued in advance to any department at any stage, except in emergency 
circumstances after normal working hours that include the existence of one or more of the 
following situations - 

9.2.1 The possibility of human injury or death; 

9.2.2 The prevalence of human suffering or deprivation of rights; 

9.2.3 The possibility of damage to property, or suffering and death of livestock and animals; 


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9.2.4 The interruption of essential services, including transportation and communication 
facilities or support services critical to the effective functioning of the Municipality as a 
whole; 

9.2.5 The possibility of serious damage occurring to the natural environment; 

9.2.6 The possibility that failure to take necessary action may result in the Municipality not being 
able to render an essential community service; and / or 

9.2.7 The possibility that the security of the state could be compromised. 

9.3 Emergency dispensation shall not be granted in respect of circumstances other than those 
contemplated in paragraph 9.2 above. 

9.4 Stock items that are issued by the Municipal Stores will not be kept at the Municipal Stores 
premises on behalf of other departments for their future use. 

9.5 Only stock items that are ordered by the Municipal Stores will be kept at the Municipal Stores 
premises. No items ordered by any other department, will be kept at the Municipal Stores 
premises. 

9.6 Stock items may be issued to other municipalities provided that the relevant Executive Director 
and the Chief Financial Officer approves such a request in writing. 

9.7 Stock items may be obtained from other municipalities or from government entities (Eskom, 
etcetera) in cases where the Municipal Stores do not have the necessary stock to ensure that 
services can be rendered by departments provided that the relevant Executive Director and the 
Chief Financial Officer approves such a request in writing. 

10. SHORTTITLE 

10.1 This policy is called the Drakenstein Municipality Stock Management Policy. 


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