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Local Government: Municipal Systems Amendment Act

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Government Gazette

REPUBLIC OF SOUTH AFRICA

Vol. 463 Cape Town 30 January 2004 No. 25960

THE PRESIDENCY
No. 82 30 January 2004
It is hereby notified that the President has assented to the following Act, which is hereby published for general information:–
No. 44 of 2003: Local Government: Municipal Systems Amendment Act,
2003.

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Act KO. 44. ‘003 I.OCAL. GOVERNMENT: hlUNICIPAL SYSTEMS AMENDMENT ACT. 7003
GENERAL EXPLANATORY NOTE:
[ ] Words in bold type in square brackets indicate omissions from
existing enactments.
Words underlined with a solid line indicate insertions in
existing enactments.
ACT
To amend the Local Government: Municipal Systems Act, 2000, so as to delete
certain definitions and insert others; to make new provision re
garding the
assignment
of functions or powers to municipalities; to provide for the submission
of annual performance reports by municipalities; to provide for the establishment
of municipal entities; and to provide for matters connected therewi
th.
B
E IT ENACTED by the Parliament of the Republic of South Africa. as
follo~~s:-
Amendment of section 1 of Act 32 of 2000, as amended by section 35 of Act 51 of
2002
1. Section 1 of the Local Government: Municipal Systems Act. 2000 (hereinafter 5
referred to as the principal Act), is hereby amended by-
((I) the insertion after the definition of “basic municipal services“ of the
“ ‘board of directors’. in relation to a municipal entity. means the board
of directors of the entity;“: 10
(hi the insertion after the definition of “district municipality“ of the following
‘* ‘effective control’, in relation to a private company. means the power
which
a shareholder in the private company may have-
directors
of the private company; or
meeting
of the private cornpix”;
following
definition:
definition:
(LI) to appoint or remove at least the majority of the board of 15
(h) to control at least the ma.jority of the voting rights at a general
the insertion after the definition
of ”executive authority” of the following
definition:
20
*‘ ‘external service provider’ means an external mechanism referred to
in section 76(b) which provides a municipal service for a municipality;”:
‘’ ‘multi-jurisdictional service utility’ means a body established in
terms of section 87;”; 25
(e) the substitution for the definition of “municipal entity” of the following
(d) the insertion after the definition of “Minister” of the following definition:
definition:
‘* ‘municipal entity’ means –

[a company, co-operative, trust, fund or any other corpo-
rate entity established in terms of any applicable national
or provincial legislation and which operates under
the
ownership control of one or more municipalities, and
includes, in the case
of a company under such ownership 5
control, any subsidiary of that company] a private cornpan!’
referred
to in section 86B( 1)irr); [or] a service utility;
or – , . , a multi-iurisdicti&l service utility:”;
If) the insertion after the definition of “municipal entity” of the foIlouinf 10 definition:
’. ‘Municipal Finance Management Act’ means the Local Govern-
ment: Municipal Finance Management Act,
2003, and any repulation5
made under that Act;”;
(x) the insertion after the definition of “nationt31 organ of state“ of the follouing 15
definition:
.. ‘National Treasury’ means the National Treasury established b!
section 5 of the Public Finance Management Act, 1999 (Act No. 1 of
1999):”: ~. .
(/I) the insertion after the definition of “organ of state“ of the foliowinr 3) – ,. ,
definition:
** ’parent municipality’-
in relation
to a municipal entity which is a private cornpan)’ in
respect of which effective control vests in a single municipal-
ity, means that municipality:
in relation to a municipal enlity which is a private company in
respect of which effective control vests in two or more
municipalities collectively, means each of those municipali-
ties:
in relation to
a municipal entity which is a senice utilit!..
means the municipality which established the entity: or
in relation to a municipal entity which is a multi-jurisdictional
service utility, means each municipality which is
a part’ to thc
25
30
— apreement establishing the service utility:”: .-
(i) the deletion of the definition of “ownership control“; 35
(j) the insertion after the definition of “prescribe“ of the following definition:
’* ‘private company’ means a company referred to in sections 19 and 20
of the Companies Act. 1973 (Act No. 61 of 1973);“: and
(X-) the substitution for the definition of “service utility” of the follo~ing
definition:
40
‘* ‘service utility’ means [a municipal entity established in
terms of
section 82(l)(c)] a body established in terms of section 86H:”.
Substitution of section 9 of Act 32 of 2000
2. The following section is hereby substituted for section 9 of the principal Act:
“Assignment of functions or powers to municipalities
45
generally by Acts of Parliament or provincial Acts
9. (1) A Cabinet member or Deputy Minister seekin, 0 to initiate the
assignment of a function
or power by way of an Act of Parliament to
municipalities in general, or any category of municipalities. must within a j

Act No. 44. 2003 LOCAL GOVERNMENT: hlUNICIPAL SYSTEMS AMENDMENT ACT. 2007
reasonable time before the draft Act providing for the assignnlent i
introduced in Parliament-
((I) request the Financial and Fiscal Commission to ashe> the iinmclal
and fiscal implications of the legislation, after informing the Financial
and Fiscal Commission
of the possible impact of such ;lssiSnnlcnt
on-
(i) the future division of revenue between the sphere
of ~ “O ernmt’nt
(ii) the fiscal power, fiscal capacitl and efficiency of nl~~nicip;~lities
(iii) the transfer, if any, of employees, assets and liabilities: and
(0) consult the Minister, the Minister of Finance and organied local
government representing local government nationall! I ith regard
(i) the assessment by the Financial and Fiscal Commission contell)-
plated
in paragraph (0):
(ii) the policy goals to be achieved by the assignment and the re:lons
for utilising assignment as the preferred option:
(iii) the financial implications of the assignment projected oc~- at
least three years;
(iv) any possible financial 1iabilitit:s or risks after the thee-!ear
period referred to
in subparagraph (iii):
(v) the manner in which additional expenditure b) municip;1litic ;I
a result of the assignment will be funded:
(vi) the implications of the assignment for the capacit! of nlunic~ip;lIi-
ties:
(vii) the assistance and support that will be pro,ided to municip;ditie
in respect of the assignment: and
(viii) any other matter that may be przscribed.
(9) An MEC seeking to initiate the assignment of ;I function or po t~ h!
way ofa provincial Act to municipalities. or any category of Inunicip;llitie.
in the province must. within a reasonable time before the dr~rft pro inci;ll
Act providing for the assignment is introduced
in the rek ant pro inc,i;ll
legislature-
(a) request the Financial and Fiscal Commission to ;~sse~ thc tinanc,ial
and tiscal implications
of the legislation. after informing the Financial
and Fiscal Commission of the possible impact of such assignment
on-
(i) the future division of revenue between the spheres of= “o’erlllllt’lll
(ii) the
fiscal power, fiscal capacity and efficiency of municipalities
(iii) the transfer, if any, of employee<,. assets and liabilities: and (0) consult the MEC for local government. the hlEC responsible for finance. and organised local governrnent representing local ~ "(>‘ern-
ment in the province, with regard to–
(i) the assessment by the Financial and Fiscal Commi~sion conten-
(ii) the policy goals
to be achieved by the assignment and the reason
(iii) the financial implications of the assignment projected
(iv) any possible financial liabilities or risks after the
(v) the manner in which additional expenditure by nlunicipalities as
(vi) the implications of the assignment for the capacity of municipali-
in terms of section 214 of the Constitution:
or any category of municipalities; and
to-
in terms of section 214 of the Constitution:
or any category of municipalities; and
plated in paragraph
(a);
for utilising assignment as the preferred option:
over at least three years;
three-year period referred
to in subparagraph (iii):
a result ofthe assignment will be funded;
ties:

lid No. 44, 2003 LOCAL GOVERN~MENT bIUNICIF’AL SYSTEMS AMENDMENT ACT. 200.:
(vii) the assistance and support that will be provided to municip, ‘I I’ Ill<' in respect of the assignment: and (viii) any other matter that may be prescribed. (3) When draft legislation referred to in subsection (1 ) or (3) i intl-oduL~lication ot’
(b) disclosing any possible financial liabilities or riskc after the threz-!,car
(c, indicating how any additional expenditure by the municipalit, ill bc
that function or power for the municipality: and
period; and
funded.”.
“Assignment of functions or powers to specific municipalities by acts of 20
executive or by agreement I
!
Insertion of section IOA in Act 32 of 2000
4. The fohving section is hereby inserted in the principal Act after section 10:
“Funding and capacity building js
I
10A. The Cabinet member, MEC or other organ of state initiating ~111
assignment of a function or power to a municipality in term of section Y or
IO. must take appropriate steps to ensure suffkient funding. and wch
capacity-building initiatives as may be needed. for the performance of the
assigned function
or power by the municipality if –
(ai the assignment of the function or power imposes a duty on the
municipality;
(0) that duty falls outside the functional areas listed in Part B of Schedule
4 or Part B of Schedule 5 to the Constitution or is not incidental 10 an!’
of those functional areas; and
municipality.”.
(c) the performance of that duty has financial implications for the 1

Act No. 44.2003 LOCAL GOVERNMEST, MUNICIPAL SYSTEMS AMENDMDT .ACT. 2003
Insertion of sections 21A and 21B in Act 32 of 2000
5. The following sections are hereby inserted in the principal Act. attcr wction 2 I
“Documents to be made public
21A.
(1 1 All documents that must be made public b!. ;I municipalir! in
terms of a requirement of this Act. the Municipal Finance hlmlayl~ent Act
or other applicable legislation, must be conveyed to the local communit)~ –
(rrl by displaying the documents at the municipalit!.’s head and satellite
offices and libraries;
07) by displaying the documents on the municipalit~’s official website. it’
the municipality has a website as en;isaged by section 2 I B: and
fc) by notifying the local community. in accordance \.it11 section 2 I. of’
the place, including the website address. where detailed particular
concerning the documents can be obtained.
(2) If appropriate. any notification in terms of subsection ( 1 ) ((‘I must
invite the local community
to submit written comments or representations
to the municipality
in respect of the relevmt documents.
Official website
21B.
(1) Each municipality must-
(a) establish its own official website if the municipalit!. decides that it 1s
affordable; and
fbj place on that oficial website information required to be made public in
terms of this Act and the Municipal 1-inance Mana, wllent Act.
(2) If a municipality decides that it is not aRordable for it to establih it
own official website, it must provide the information in terms ot’ legizlation
referred
to in subsection (1)fh) for display on an orpnised local
government website sponsored
or facilitated by the National Treasury.
(3) The municipal manager must maintain and reyularl~ updatc the
municipality’s official website.
if in existence. or pro ide the releallt
information as required by subsection
(2).”.
Substitution of section 46 of Act 32 of 2000
6. The following section is hereby substituted for section 46 of the principal Act:
“Annual performance reports
46. ( 1 )A municipality must prepare for each financial year ;I performance
report reflecting

(nj the performance of the municipality and of each external sen ice
provider during that financial year:
(0) a comparison of the performances referred to in paragraph fuj M it11
targets set for and performances in the previous tinancial !)ear: and
(c) measures taken to improve performance.
(2) An annual performance report must form part of the municipality’
annual report in terms of Chapter
12 of the Municipal Finance Manqement
Act.”.
Amendment of section 55 of Act 32 of 2000
7. Section 55 of the principal Act is hereby amended by the substitution in subsection
“(c.) proper and diligent compliance with [applicable municipal finance manage-
(2) for paragraph (c) of the following paragraph:
ment legislation] the Municipal Finance Management Act.”.

17 No. 25960 GOVERNMENT GXZFTlL. 31 1 \l ?I:> ?~’~~-j
Act No. 44,2003 !.OCAL GOVERNMENT:
MUNICIPAL SYSTEMS AMENDMENT ACT. 7003
Amendment of section 57 of Act 32 of 2000
8. Section 57 of the principal Act is hereby amended by the insertion atter subsection
“(4A) The provisions of the Municipal Finance Mana,cement Act confrrriny
responsibilities on the accounting officer of a municipality must be
regarded a
forming part of the performance agreement of a municipal manager.
(4B) Bonuses based on performance may be awarded to a municipal manager
or
a manager directly accountable to the municipal manager after the end of thc
financial year and only after an evaluation of performance and approval
of wch
evaluation by the municipal council concerned.”.
(4) of the following subsections:
Repeal of section 58 of Act 32 of 2000
9. Section 58 of the principal Act is hereby repealed
Amendment of section 74 of Act 32 of 2000
10. Section 74 of the principal Act is hereby amended by the substitution t’or
subsection (1) of the following subsection: 15
‘*( 1 )A municipal council must adopt and implement a tariff polic!. on the It, yiny
of fees for municipal services provided by the municipality itself 01- h! \.:I!’ of
service delivery agreements, and which complies with the provisions of till5 Act,
the Municipal Finance Management Act and [with] any other applicable
legislation.”. 20
Amendment of section 78 of Act 32 of 2000
11. Section 78 of the principal Act is hereby amended-
([I) by the substitution for subsection (3) of the following subsection:
“(3) If a municipality decides in term of subsection (?)(/I, to explort.
the possibility of providing the municipal service throuyh an
extcrnill 25
mechanism it must-
give notice to the local community
of its intention to t.plorc
the proision of the municipal service through an e crnal
mechanism;
[and] assess the different service delivery options in terms of section 30
76(b). taking into account-
the direct and indirect costs and benetits aswciatd
with the project, including the expected effect
of an!.
service delivery mechanism on the environment and on
human health. well-being and safety: 3s
the capacity and potential future capacity of prospx-
tive service providers to furnish the skills. exprrtie
and resources necessary for the pro.ision
of the
service;
the views
of the local community: 40
the likely impact on development. job creation 2nd
employment patterns in the municipality: and
the views of organised labour: and
conduct
or commission a feasibility study which must be taken
into account and which must include-
(i) a clear identification of the municipal service for Lvhich
the municipality intends to consider an external mech;!-
nism;
(ii) an indication
of the number of years for which the
provision of the municipal service through an external
mechanism might be considered;
45

the projected outputs rn hich the pro iion 01′ tlw
municipal service 1.hrough an external mcchani
1
might be expected to produce:
an assessment as
to the extent to n.hich the pro iion 01′
the municipal service through an external nwcll;lnisllI
will-
(aa) provide value for money:
(bb) address the needs of the poor:
(cc) be affordable for the municipalit! and reident:
(dd) transfer appropriate technical. operational and
the projected impact on the municipalit! . afl’. a\c’t
and liabilities:
the projected impact on the municipalit!,’ intc~gratccl
development plan:
the projected impact on the municipalit!
.s huciyzt. lor
the period for Lvhich an external mechanism might 1~
used. including impacts on revenue. expenditure.
borrowing. debt and tariffs:
and
and
financial risk:
– any other matter that may be prescribed.”: and
(hi by the addition of the following subsection:
“(6) The national government or rele,ant pro,incial go ernnlent ma!.
in accordance with an agreement. assist municipalities in c;~rr in? out ;I
feasibility study referred to in subsection (3)((,). or in preparing cl~n icc
delivery agreements.”.
Substitution of section 80 of Act 32 of 2000
12. The following section is hereby substituted for section X0 of the pt~incilxil Act:
“Provision of services through service deliver!. agreements ith
external mechanisms
80. (1) If a municipality decides to pro,ide a municipal sc~n ICC through
a service deliwry agreement in terms of section 7h(h) with-
ftr) a municipal entity another municipalit!. [or A national or
provincial organ of state]. it may. xhiect to suhsection i .3 ). nescxi: c
and enter into such an agreement rn.ith the relevmt municip1I entit!
municipality
[or organ of state] J.vithout applyins Part i ot this
Chapter; [or] (([A) a national or provincial oryan of state. it ma! enter into uch ;In
ayreement with the relevant organ of state N,ithout appl ing F’xt 3 of’
this Chapter: or 4)
(h) any institution or entity, or any person, juristic 01- n:ttural. not
mentioned
in paragraph (a) or (CIA). it must ;~ppl! Parr -3 of thi
Chapter before entering into such an agreement it11 :1n! such
institution, entity
or person.
-_
(2) Before a municipality enters into a service delivery agreement [for a 45
basic municipal service] with an external service pro.ider it mtlst establih
a [mechanism and] programme for community consultation mJ infbrma-
tion dissemination regarding the appointment of the external
sen ice
provider and the contents of the service delivery agreement. The content
of’
a service delivery agreement must be communicated to the local conlmu- 30
nity through the media.
(3) (a) Where a municipality decides to enter into a sen ice deli el.!
agreement with another municipality as contemplated by section 7h(bl(ii). 1
that other municipality must conduct or commission a feasibilit! stud!.
which
it must take into account, before the service deliver!, agreement i
entered into.
(b) The feasibility study referred to in paragraph (LIJ, nlust include- 1 (i) an assessment on the impact on the budget of that other municipality.
and
on its assets, liabilities and staff expenditure. for each of the

financial years that it intends to serve as an external scr ice pro icier.
(ii) an assessment on whether it will be necessar!’ to incre;w the ntlmbcr ,
of staff to enable that other municipality to be an external xm.ic.c.
provider, and whether it will be necessary to transfel GI- wcon~! an! ~
staff from the appointing municipality to that other rnunicipalit! : , 5
(iii) an assessment on the ability of that other municipulit~ lo absorb an! 1
commitments, liabilities or employees involwd. if and n.hen the
appointment as external service proi’ider ends: and
~
(iv) any other relevant information as may be prescribed.”.
Amendment of section 81 of Act 32 of 2000 IO
13. Section 81 of the principal Act is hereby amended-
(ai by the substitution for subparagraph (v) of paragraph it71 of xuhsection (21 of
“(v) managing its own accounting, financial management. budgetins.
investment and borrowing activities \ithin
;I tl-amework of 15
transparency, accountability, reporting and tinancial control
determined by the municipality. subject
to (applicable munici-
pal finance management legislation] the L,lunicipal 1’1nanct.
Management Act;”: and
the
following subparagraph:
(hi by the insertion after paragraph (0) of subsection (2) of the followiny 20
paragraph:
“(hA) must ensure that the agreement provides for
;1 diapt~te-resolution
mechanism
to settle disputes between the municipality alltl the
service provider;”.
Repeal of section 82 of Act 32 of 2000 _. ‘i
14. Section 82 of the principal Act is hereby repealed.
Amendment of section 83 of Act 32 of 2000
15. Section 83 of the principal Act is hereby amended by the substitution in aubwctio~l
( I ) for paragraph (a) of the following paragraph:
“(0) [are competitive, fair, transparent, equitable and cost-effective] compl! 3)
with Chapter 11 of the Municipal Finance hk~napement Act:”.
Substitution of heading to Part 4 of Chapter 8 of Act 32 of 2000
16. The following heading is hereby substituted for the heading to Part 1 of Chapter
8 of the principal Act:
“Part 4: Internal municipal service districts”. .> .1 7-
insertion of Part 4A in Chapter 8 of Act 32 of 2000
17. The following Part is hereby inserted in the principal Act after section 86:
*’Part 4A: Regulations and guidelines regarding municipal services
Regulations and guidelines regarding municipal services 1 40
86A. (1) The Minister may for purposes of this Chapter make regulations
or issue guidelines in accordance with section 120 to provide for or regulate
the following matters:
(a) The preparation, adoption and implementation of a municipal tariff
16) the subsidisation of tariffs for poor households through-
(i) cross-subsidisation within and between services;
(ii) equitable share allocations to municipalities: and
(iii) national and provincial grants to municipalities;
policy;
(c) limits
on tariff increases;

111
I111 i
LOCAL GOVERNMEST: hlUNlCIPAL SYSTEMS AMENDMEXT ACT. 200.1
criteria to be taken into account by municipalitie \hen irnpo~n~
surcharges on tariffs for services and determining tht dur;ltion thtrtol’:
incentives and penalties
to encourage –
(i) the economical, efficient and effective use of reot~rce l1cn
(ii) the recycling of waste: and
(iii) other environmental objectives:
providing
services;
criteria
to be taken into account by municipalitie hen a \ln:
options for the provision of a municipal service:
measures against malpractice
in selecting and appointing en icc
providers, including measures against the stripping of’ nlullicilxll
assets:
mechanisms and procedures for the co-ordination and
intt’gration oi
sectoral requirements in terms ofleg~slation with thi Chapter. and tllc
manner
in which municipalities must comply uith these:
standard draft service delivery agreements:
the minimum content and management of service dcli.er!,
~12rec-
ments:
additional matters that must be included
in a feasibilit! td! in terms
of section 78(3)(c), which may include-
(i) the strategic and operational costs and benetits of’ ;in t trn;ll
mechanism in terms of the municipality’s strattgic ot?,jc’cti es:
(ii) an assessment of the municipality’s capacit! to c’ft’tcti i!
monitor the provision of the municipal senice through
;m
external mechanism and to enforce the wn ice clcii r!
agreement;
performance guarantees by service pro,iders: and
any other matter that would facilitattt

(i) the effective and efficient provision of municipal sen ices:
(ii) the amlication of this Chanter.
or
(2) The Minister may only make rtgulations and issue guideline
contemplated
in subsection (I)((/) to (e) after consulting u ith the blinistcr 1
of Finance and any other Cabinet membt~r whose portfoilo i atfccted h!
such regulations and guidelines.
(3) When making regulations or issuing guidelines in ttm of’ wction
120 to provide for or regulate the matters mentioned in substction ( I 1. the
Minister must-
((/) take into account the capacity of municipalities to compl! ith wc11
(b) differentiate between different kind of municipalitie according to
..
regulations and guidelines: and
their respective capacities.”.
Insertion of heading and sections 86B, 86C, 86D, 86E, 86F, 86G, 86H. 861. X6J and
86K in Act 32 of 2000
18. The following headings and sections are hereby inserted in the principal Act after 45
hsction 86A:
“CHAPTER SA I
MUNICIPAL ENTITIES
Part I: General provisiom 50
Kinds of municipal entities
86B. (I) There are the following kinds of municipal entities:
(0) a private company-

20 No. 25960 GOVERN:vIENT(;.-ZFTT~. 70 I \i I<) ZOO- Act No. 44,2003 LOCAL GOVERNMENT: MLJNICIPAL SYSTEMS AMENDMENT .-CT. 2003 (i) established by one or more municipalities in term of Part 2: or (ii) in which one or more municipalities ha.? acquired or hold an (b) a service utility established by a municipality in term of Part i: and (c) a multi-jurisdictional service utility established b!, two or mre (2) No municipality may establish, or participate in the establishment of. or acquire or hold an interest in. a corporate body. including a trust. except where such corporate body is- (a) a private company, service utility or multi-jurisdictional scr,ice utilit! (bj a fund for the benefit of its employees in terms of a law replatiny (3) Subsection (2) does not apply to the acquisition by a municipality for investment purposes of securities in a company listed on the Johanneburg Securities Exchange in accordance with the investment framevorl envisaged in section 13 of the Municipal Finance Management Act. interest in terms of Part 2; municipalities in terms of Part 4. referred to in subsection (1); or pensions or medical aid schemes. Part 2: Private companies Establishment and acquisition of private companies 86C. (I) A municipality may, subject to subsection (2)- (a) establish or participate in the establishment of a priwte cornpan! in (h) acquire or hold an interest in a private company in accordance ith the (2) (a) A municipality may in terms of subsection (I)(()) or (hi either acquire or hold full ownership of a private company. or acquire or hold ;I lesser interest in a private company. (b) A municipality may acquire or hold such a lesser interest in ;I pi ate‘ company only if all the other interests are held by- accordance with the Companies Act. 1973 (Act No. 6 I of 1973): or Companies Act. 1973 (Act No. 61 of 1973). (i) another municipality or municipalities; (ii) a national or provincial organ of state or organs ot state: or (iii) any combination of institution:, referred to in subparagraph ( i (c) A municipality may. despite paragraph IhJ. acquire or hold an interest in a private company in which an investor other than another municipalit! or a national or provincial organ of state has an interest. but only ifefft.cti c control in the private company vests in- and (ii). (i) that municipality; (ii) another municipality; or (iii) that municipality and another municipality collectivel>,.
(3) If a municipality establishes a privar company or acquire5 or hold
an interest in such a company, it must comply with the Companies Act.
1973 (Act
No. 61 of 1973), and any other law regulating companies. but it
any conflict arises between that Act or such law and a provision of this Act.
this Act prevails.
Legal status of private companies established by municipalities or in
which municipalities hold interests
86D.
(1) A private company referred to in section 86C( 1)-
(a) is a municipal entity if a municipality, or two or more municipalitieh
collectively, have effective control of the private company:
or

Art No. 44.2003 LOCAL GOVERNMENT. MUNICIPAL SYSTEMS AMENDhlEXT ACT, 200.2
(h) is a public entity to which the Public, Finance hlanagclnent h.1. I ()()()
(Act NO. 1 of 1999), applies if ownership control in the compn!.
within the meaning
of that Act, is held b!, a national 01′ pro 1nc1a1
organ of state.
(2) A private company which is a municipal entit!-
(a) must restrict its activities to the purpose for \hich ir i used h! it
parent municipality in term5 of section 86E( I )((/I: and
(19) has no competence to perform any activity nhich t;lll outitle tht’
functions and powers of its parenr. municipalit! contcn1pl;lrcd h!
section 8.
Conditions precedent for establishing or acquiring interests in priate I
companies I !
86E. (1 ) A municipality may establish ;I private cornpan! or xquirc an 1
interest in such a company only-
(a) for the purpose of utilising the company ;IS ;I mech;lnim to assist it 111 ~ 15 ~
the performance of any of its functions or pou ers referred lo in cc.tion ~
8:
(h) if the municipality can demonstrate that-
(i) there is a need to perform that function or pouer in accord;mL,c I
with business practices in order to achiec the strategic ‘ 20
objectives of the municipalit!, more effectii el! : mtl
(ii) the company would benetit the local cornmunit! : and
(ci if any other conditions that may be prescribed hae h.en con~pliL~d
i
with.
(3) Ifn municipality establishes a primtt. compan! or :1cquirL ;In tn1el.c[ 3
in such a company for the purpose of using that cornpan! ;I ;I nvxhani
l 1
to provide ;I municipal service, Chapter 8 applies. I
Conditions precedent for co-owning of private companies ~
86F. If two or more municipalities intend to establish ;I pri are cornpan!
or to acquire interests in the same private cornpan!. C;Ich ol thoc
municipalities must-
(LIJ comply with section 86E:
(hi consider and reach agreement on proposals tor shared control of’ the
(c) consider cash flow projections of the cornpan! .s proposcd operation
company:
and
for at least three financial years.
Disposal of companies and equity interests in companies 1 i
86G. A municipality may transfer ownership or other ise dispow of-
((0 a wholly owned private company. subject to the hlunicipal Finance
(h) an interest in a private company –
Management Act: or
(i) subject to section 14 of the Municipal Financt. Management
Act: and
(ii)
if that transfer or disposal would not result in an infringement
of section
86C(2) by another municipality which holds an
interest in the company.
Part 3: Service utilities
Establishment
86H. (1) A municipality may pass a by-law establishing a service utilit!.
io

Act No. 44.2003 LOCAL GOVERNMENT: MUNICIPAL SYSTEMS AMENDMI3NT ACT. 200.2
(2) A by-law establishing a service utility must-
(a) state the purpose for which the service utility is established:
(h) confer the powers and impose the duties on the senice utilit!, which
(c) provide for- >
I
are necessary for the attainment of such purpose:
(i) a board of directors to manage the service
utility:
(ii) the number of directors to be appointed:
(iii) the appointment of directors. the tilling of acancies and the I
replacement and recall of directors by the parent municipallt! : 1
(iv) the terms and conditions of appointment of directors: ~ 10
(v) the appointment of a chairperson;
(vi) the operating procedures of the board
of directors: ~ i
(vii) ‘ the delegation of powers and duties to the hoard of directors: i
(viii) any other matter necessary for the proper functioning of rhc !
(ix) the acquisition of infrastructure. goods. services. supplieh or
i
i
board of directors: ~ I5
equipment by the service utility. or the transfer of infrustru- ‘
ture. goods. services, supplies or equipment to the ser.ic~t> I
utility;
(x) the appointment
of staff by the service utility. or the tran er 01. I 20
secondment of staff to the service utility in accordance wit11 I
applicable labour legislation:
(xi) the terms and conditions on which an) acquisition. tran+r’.
: i
appointment or secondment is made; I
(xii) the governance of the service utility: and
(xiii) any other matter necessary
for the proper functioniny of the
service utility: and ~ li
(d) determine budgetary and funding arrangements for implementatiol~ ot !
the by-law. I
(4) No by-law may confer on a service utility any functions or powtw ~ 30
i
falling outside the competence of the parent municipality contemplatrcl b!
section 8. 1 I
Legal status of service utilities
861.
(1) A service utility is a juristic person and a municipal entity under
(2) A service utility-
the
sole control
of the municipality which established it.
(a) must restrict its activities to the purpose for which it was established:
(b) has no competence to perform any activity which falls outside if
and
functions
or powers in terms of a bylaw of the municipality.
Conditions precedent for establishing service utilities 1
865. (1) A municipality may establish a service utility only-
(a) for the purpose of utilising the service utility as a mechanism to assist
the municipality in the performance of any of its functions or powers
referred to in section
8;
(6) if the municipality can demonstrate-.
(i) that that function
or power could be performed more efficiently
by a separate structure
in order to achie,e the strategic
objectives of the municipality, and
(ii) that the service utility would benefit the local community; and
(c) if all other conditions that may be prescribed have been complied with.
-1s
5 0

Act so. 44. 2003 LOCAL GOVERNMENT: hll~NICIPAL SYSTEMS AMENDMENT ACT. 2003
(9) If a municipality establishes a service utility for the purpose of using
that service utility as a mechanism
to provide a municipal ser,ice. Chapter
8 applies.
Disestablishment of service utilities I
86K. (I ) A municipality may pass a by-law disestablishing ;I sen ice
(7) If a service utility is disestablished-.
utility
which
it has established.
IC/) all assets. liabilities. rights and obligations of the service utility ‘est in
(17) staff of the service utility must be lrtealt with in accordance with
the
municipality: and
applicable labour legislation.
Part 4: Multi-jurisdictiorlal service utilities”
Substitution of section 87 of Act 32 of 2000
19.
The follou,ing section is hereby substituted for section 87 of the principal Act:
“Establishment of multi-jurisdictional service utilities I5
87. Two or more municipalities. by Lvritten ayreement. ma! e ablish ;I
I1llllti-.jurisdictional service utility to pet form any function or pcner-
envisayed by section 8 in their municipal arras or in any dehignated parts of
their municipal areas.”.
Amendment of section 88 of Act 32 of 2000 20
20. Section 88 of the principal Act is hereby amended by-
/(I) the substitution for the heading of the following heading:
“Minister requesting [the] establishment of multi-jurisdictional [mu-
nicipal service districts] service utilities”:
and
((7) the substitution for subsection ( I ) of the following subsection: ‘i
“( 1) The Minister may. in the national interest and in consultation with
the
[national Minister] Cabinet member responsible for thc functional
area
in question. request two or more municipalities to establish Idesig-
nated] a mLllti-jurisciictional [municipal senice districts] ser.ice utilit, to
conform to the requirements
of national le$slation applicable to the 30
prolision of a specitic municipal service.”.
-.
Substitution of section 89 of Act 32 of 2000
21.
The following section is hereby substituted for section 89 of the principal Act:
“Contents of agreements establishing multi-.jurisdictional [municipal
service districts] service utilities
.I 3 —
89. [(l)] An agreement establishing a multi-jurisdictional [municipal
service district] service utility must describe the rights. obligations and
responsibilities
of the [participating] parent municipalities. and ml~st-
(rr) determine the boundaries of the rdistrict] area for Lvhich the
(b) identify the municipal service or other function to be provided in
[(c) determine the mechanism that will provide the service in the
Id) determine budgetary and funding [and scheduling] arranyements IS
(e) provide for-
multi-jurisdictional service
utility is
established: 40
terms of the agreement;
district;] for implementation ofthe agreement;

28 No. 25960 GOVERNMENT GAZETTE. 70 I.-XL’.Rl’ 2004
Act No. 44,2003 LOCAL GOVERNMENT.
MUNICIPAL SYSTEMS AMENDMENT’ ACT. 2003
[the establishment of a governing body] a hoard of
directors for the multi-jurisdictional [municipal service
district] service utility;
the appointment of
[representatives of the] directors b, the
respective
[participating] parent municipalities [to the
governing body],
the filling of vacancies and the replace-
ment and recall of
[representatives] directors:
the number of
[representatives] directors appointed [for] b~ each [participating] parent municipality[. subject to
subsection (2)];
the terms and conditions of appointment of [those repre-
sentatives] directors;
the appointment of a chairperson:
the operating procedures of the
[governing body] board of
directors;
the delegation
of powers and duties to the [governing body
consistent with section
921 board of directors; and
any other matter relating to the proper functioning
of the
[governing body] board of directors;
(fl provide for-
(i) the acquisition
of infrastructure, goods. services. supplies or
equipment by the [governing body] multi-jurisdictional
service utility, or the transfer
of infrastructure. goods.
services, supplies
or equipment to the [governing body] multi-.jurisdictional service utility:
(ii) the appointment of staff by the [governing body] multi-
jurisdictional service utility,
or the transfer or secondment of
staff to the [governing body] multi-jurisdictional service
utility in accordance with applicable labour legislation:
&
(iii) the terms and conditions on which any acquisition, transfer.
appointment
or secondment is made: [and] (8) determine the conditions for, and consequences of, the withdrawal
from the agreement
of a [participating] parent municipality:
(h) determine the conditions for, and consequences of, the termination
of the agreement, including-
(i) the method and schedule for winding-up the operations
of
(ii) the distribution of the proceeds: and
(iii) the allocation among the
[participating] parent municipali-
ties of any assets and liabilities; and
the
[district] multi-jurisdictional service
utility:
(i) provide for-
(i) the governing of the multi-jurisdictional service utility:
(ii) compulsory written reports regarding the activities and
performance of the multi-jurisdictional service utility
to a
parent municipality:
(iii) information that may be requested from the multi-jurisdic-
tional service utility by a parent municipality:
(iv) the amendment of the agreement; and
(v) any other matter necessary for the Droper functionine of the – multi-jurisdictional service utility. —
[(2) A governing body must consist of between three and fifteen
Substitution of section
90 of Act 32 of 2000
5
1 0
IS
22. The following section is hereby substituted for section 90 of the principal Act:

.
t No. 44,2003 LOC.4L GOVERNMEST’:
MUNICIPAL SYSTEMS AMENDMENT .ACT. 200.;
“Legal status of [governing bodies] multi-jurisdictional sen ice utilities
90. (1) [The governing body of a] A n~ulti-jL~risdlctiollal [municipal
service district] service utility is a juristic person. and
a municip;ll entit!
under the shared control of the parent municipalities.
(2) A multi-iurisdictional service utility-..
io) must restrict its activities to the ob.ject for which it \;I c ahli~hed:
and
(1,) hasno competence to perform any activity vhich f:~ll outicltl it
functions in terms of the agreement referred to in src1ion S7.”.
Repeal of section 91 of Act 32 of 2000 io
23. Section 91 of the principal Act is hereby repealed
Substitution
of section 92 of Act 32 of 2000
21.
The following section is hereby substituted for section 92 of the principll :Zct:
“Control of [governing bodies of] multi-jurisdictional [municipal
service districts] service utilities
I5
92. I ) [The governing body of a] A – n~ulti-jurisdiction;~l [municipal
IN) is accountable to the [participating] parent mLlnicipalitit.~: and
(h) must comply with [any legislation applicable to the financial
service district] service
utility-
management of municipalities and municipal entities] 20
Municipal Finance Management Act.
(2) A [participating] parent municipal it!^–
lrrl is entitled to receive such regular written repom fro111 the
[governing body
of a district] multi-jurisdictiolal en ice utilit!
with respect to its activities and performance. a ma!. he het OLII in 25
the agreement establishins the [governing body] ~ll~~lti-jt~ri~lic-
tional service utility;
lbi may request the [governing body] multi-jurisdictional cn ice
utilitv to furnish it with such information regarding it acti itit. ;I
the [participating] parent municipality may reasonahl! Iqtlirtl: ?O
and
(L’) may appoint a nominee to inspect, at any time dtlrlns 11orm;d
business hours. the books, records. operations and tacilitie
ot’ thc
[governing body] multi-jurisdictional service utilit!. and [of1 those
of its contractors relating
to the [provision of the n~unicipal 35
service] performance of the function or power for \.hich the
[district] multi-jurisdictional senice.
utility is estahllshrtl.”.
Substitution
of section 93 of Act 32 of 2000
25. The following section is hereby substituted for section 93 of the principal Act:
“Termination of multi-jurisdictional [municipal service districts] 40
service utilities
93. A multi-jurisdictional [municipal service district] hen ice utility
(til automatically. when there is only one remaining [Participating] Ihl by written agreement among all of the [participating] parent
terminates-
parent municipality;
45
municipalities; or

32 No. 25960 GOVERNRll_NI’G,~ZETTE. 10 JAI’..K) ?(IO-;
Act No. 44,2003 LOCAL GOVERNMENT:

MUNICIPAL SYSTEMS AMENDMENT .ACT. 200.1
(c) upon the termination date or the fulfilment of any condition for
termination contained in the agreement establishing the [district I
multi-jurisdictional service utility.”.
Insertion of parts 5,6 and 7 in Chapter 8A of Act 32 of 2000
26.
Thc following Parts are hereby inserted in Chapter 8A of the principal .4cl after
section
93:
“Part 5: Duties and responsibilities of parent municipalities
Duties of parent municipalities with respect to municipal entities
93A.
The parent municipality of a municipal entity-
fa) must exercise any shareholder, statutory. contractual or other right5
and powers
it may have in respect of rhe municipal entit!. to ensure
that-
(i) both the municipality and the municipal entity comply with
this Act, the Municipal Finance Management Act and
an!’
other applicable legislation: and
(ii) the municipal entity is managed responsibly and trunsparentl!.
and meets
its statutory, contractual and other obligations:
(6) must allow the board of directors and chief executive officer of the
(c) must establish and maintain clear channels of communication between
municipal entity to fulfil their responsibilities; and
the municipality and the municipal entity.
Parent municipalities having sole control
93B.
A parent municipality which has sole control of a municipal cntit!.
or effective control in the case of a municipal entity which is :I pri.ate
company-
(a) must ensure that annual performance objectives and indicator5 for thc’
municipal entity are established by agreement with the municipal
entity and included in the municipal entity’s multi-year huinez plan
in accordance with section
87(5)(d) of the Municipal Finance
Management Act;
(b) must monitor and annually review. as part of the municipal entit!’s
annual budget process as set
out in section 87 of the Municipal
Finance Management Act, the performance of the municipal entit!
against the agreed performance objecti.es and indicators: and
(c) may liquidate and disestablish the municipal entity –
(i) following an annual performance review. if the performance ot’
the municipal entity is unsatisfactory;
(ii) if the municipality does not impose
a financial recovery plan in
terms of the Municipal Finance Management Act and the
municipal entity continues to experience serious
or persistent
financial problems;
or
(iii) if the municipality has terminated the service deli.ery agrer-
ment
or other agreement it had with the municipal entity.
Parent municipalities having shared control
93C.
Parent municipalities that have shared control of a municipal
entity-
(a) must enter into a mutual agreement determining and regulating-
(i) their mutual relationships in relation
to the municipal entity;

LOCAL GOVERNMENT: hlUNICIPAL SYSTEMS AMENDMEN’T ACT. 100.~
the exercise of any shareholder. contractual or other righ[ :1nd
powers they may have in respect of the municipal entit!,:
the exercise of their powers and f’unctions
in term of thi Act ;und
the Municipal Finance Management Act ith respecr to the
municipal entity;
measures to ensure that annwl performance objecti
es and
indicators for the municipal entity are established
h!, agreemcnt
with the municipal entity and included
in the municipal cntit! ‘
multi-year business plan in accordance ~vith section 87(5)1r/, of
the Municipal Finance Management Act:
the monitoring and annual re,ieu,.
as put of the municip;ll
entity’s annual budget process
as set out in section Xi 01′ 1111’
Municipal Finance Managemen1 Act, of the performance of the
municipal entity against the established performance ol?jt.cti
e< and indicators; the payment of any monies by the municipalities to the municip;ll entity or by the municipal entity to the municipnlities: procedures for the resolution of dihputes betneen thosc n1uniL.i- palities: procedures governing conditions for and consequellces of ith- drawal from the municipal entit!, by a municipalit : procedures for terminating the appointment and utilisation of the municipal entity as a mechanism for the perfornwnce 01. J municipal function: the disestablishment of the municipal entit!,. the di iion. tran er or liquidation of its assets and the detrrminntion of' t11r responsibility for its liabilities: and (xi) any other matter that may be prescribed: and (hi may liquidate and disestablish the municipal entit! - (i) following an annual performance review. if the performance of the municipal entity is unsatisfactory: (ii) if the municipality does not impose ;I financial recoer! plan in terms of the Municipal Finance hlanagement Act and t11c municipal entity continues to elperiencr serious or pcri ent financial problems: or (iii) if the municipality has terminated the sen ice deli er! :lgreenlLwt or other agreement it had with the municipal entit!. Municipal representatives 93D. ( 1 ) The council of a parent municipality must dehignate a councillor or an official of the parent municipality. or both. ;I thc represent:ttie or representatives of the parent municipality-- (uj to represent the parent municipality as a non-participatin~ ohsenw at meetings of the board of directors of the municipal entit! concerned: and (h) to attend shareholder meetings and to exercise the parent municipali- ty's rights and responsibilities as a shareholder. together uith such other councillors or officials that the council ma! designate ;IS representatives. (2) (a) The official lines of communications between ;I municipal entit! and the parent municipality exist between Ihe chairperson of the board of directors of the municipal entity and the mayor or executiy mayor. as the case may be, of the parent municipality. (b) The mayor or executive mayor. as the case may be. of a parent municipality may at any time call or converle any meeting of shareholder or other general meeting comprising the board of directors of the municipal 1. I. Act No. 44, 2003 LOCAL GOVERNMENT: MUNICIPAL SYSTEMS AMENDMENT ACT. 7003 entity concerned and the representatives of the parent municipalit>. in orc1c1-
for the board of directors to give account fhr actions taken b! it.
(c) The council of a parent municipality may detertninr the reporting
responsibilities of a municipal representative referred to in wh~cctloil
(I)(a) or fb).
(3) (a) A municipal representative referred to in subsection ( I )thi. mu(
represent the parent municipality faithfully at shareholder meeting>.
without consideration of personal interest or gain, and mttq
keep the
council informed
of-
(i) how voting rights were exercised: and
(ii) all relevant actions taken on behalf of the municipalit!.
by the
(b) A municipal representative referred to in subsection ( 1 or (/I) –
(i) must act in accordance with the instructions of the council: and
(ii) may be reimbursed for expenses in connection
lvith hi4 or her
duties as a municipal representative, but may not receix an
additional compensation or salary for such duties.
representative.
Part 6: Governance of municipal entities
Appointment of directors
93E.
(1) The board of directors of a municipal entity-
(a) must have the requisite range of expertise to effectivel!, manage and
(b) must consist of at least a third non-exocutive directors: and
(c) must have a non-executive chairperson.
nominating or appointing
a director, establish a process through Lvhich-
(a) applications for nomination or appointment are widely solicited:
(6) a list of all applicants and any prescribed particulars concerning
(c) the municipal council makes the appointment or nomination froln
guide
the activities of the municipal entity;
(2) The parent municipality of a municipal entit! must. before
applicants is compiled; and
such list.
Disqualifications
93F.
(1) A person is not eligible to be a director of a municipal entit!, if
he or she –
(a) holds office as a councillor of any municipality;
(b) is a member of the National Assembly or a provincial legislature:
(c) is a permanent delegate to the National Council of Provinces:
id) is an official of the parent municipalit] of that municipal entit) :
(e) was convicted of any offence and sentenced to imprisonment vithout
the option of a fine, and a period of five years since completion of the
sentence has not lapsed;
(f, has been declared by a court to be of unsound mind; or
(g) is an unrehabilitated insolvent.
(2) If a director of a municipal entity during that person’s term of office
becomes disqualified on a ground mentioned in subsection ( 1 ). such person
ceases
to be a director from the date of becoming disqualified.
Removal or recall of directors
93G.
The parent municipality of a municipal entity may remove or recall
a director appointed or nominated by that municipality-
(a) if the performance of the director is unsatisfactory;
(b) if the director, either through illness or for any other reason. is unable
to perform the functions
of office effectively; or

(c) if the director, whilst holding office-
(i) is convicted of fraud or theft or any ott’ence inoI ins
fraudulent conduct; or
(ii) has failed to comply with or breached an! Icgilatiot1
regulating the conduct of directors. including
an!. applicahlc
code of conduct.
Duties of directors
93H. ( 1) The board of directors of a municipal entit!, must-
frr) provide effective, transparent. accountable and cohel-ent c~~rpor;~c
governance and conduct effective oversight of the affair oi the ~ IO
municipal entity;
legislation and agreements;
municipal entity: and
~ I5
(D) ensure that it and the municipal entity comply with all applicahlr. ~ I
fc) communicate openly and promptly with the parent municipalit! of the ~
ld) deal with the parent municipality of the municipal entit!’ in yod l.aitl1.
~NJ disclose to the board of directors. and to the represrntatic ot the
(2 ) A director must-
parent municipality, any direct
or indirect personal or buines inrerc I
that the director or his or her spouse or partner may hae in an! Imttt~l- ‘ 20
before the board, and must withdraw from the proceeding ot tllc
board when that matter is considered. unless the board
decides that tlw ~
director’s direct or indirect interest in the matter is tri,ial or irrelr. ant: ~
and ~
referred to in section 93L. I
(1)) at all times act in accordance with the Code of Conduct tor dirr.ctol. ‘ 25
RIeetings of board of directors ~
931. (1) Meetings of the board of director5 of a municipal entit! mu hc
open to the municipal representatives referred to in section 03D( I )(tri.
(2) Municipal representatives referred to in section 93D( I )((/i ha c
non-participating observer status in a meeting of the board of dtl-ector of ;I
municipal entity.
;2ppointment of chief executive officer
935.
( 1) The board of directors of a tnunic~pal entity must appoint ;I chief’
(2) The chief executive officer of a municipal entity is accountable to the
executive
officer
of the municipal entity.
board of directors for the management of the municipal entit!.
Part 7: General
Establishment of and acquisition of interests in corporate bodies
disallowed
93K.
(1 ) A municipal entity may not-
corporate body, including a trust:
or
including a trust.
(a) establish or participate in the establishment of a compan! or an othcr
(17) acquire or hold an interest in a company or any other corporate hod!,.
(2) Subsection (1) does not apply to-
(a) the acquisition by a municipal entity of securities in a company listed
on the Johannesburg Securities Exchange for investment purposes.
subject to any applicable provisions of the Municipal Finance
Management Act;
or

40 No. 25960 ci 111
Schedule 2 applies. with the necessary changes. to memhe1-~ of staft of ;I
municipal entity.
(3) For purposes of this section, any refclrence in Schedule I or 2 to ;I
‘councillor’, ‘MEC for local government in the proince’. ‘municipl
council’, ‘municipality’ and ‘rules and orders’ must. unles incon~iatent
with the context or otherwise clearly inappropriate. be construed
:I :I
reference to a director of a municipal entity. parent municipalit!. homi of
directors, municipal entity and procedural rules, respectively.”.
Repeal of section 94 of Act 32 of 2000
27.
Section 94 of the principal Act and the Part-heading preceding wction Y4 art’
hereby repealed.
Amendment of section 120 of Act 32 of 2000
28. Section 120 of the principal Act is hereby amended by the substitution in
subsection (1) for paragraph (a) of the following paragraph:
“(a) the matters listed in sections 22, 37, 49, 72, [94] – 86A and 104:”.
Insertion of item 14A in Schedule 2 to Act 32 of 2000
29.
The following item is hereby inserted in Schedule 2 to the principal Act after
item
14:

“Disciplinary steps 14A.
(1) A breach of this Code is a Zround for diw1l\al or otilcr
disciplinary steps against a staff member who has been found guilt! of’hu~.h
a breach.
(a) suspension without pay for no longer than three months:
(b) demotion:
(c) transfer to another post:
(d) reduction in salary, allowances or other benetits: or
(e) an appropriate fine.”.
(2) Such other disciplinary steps may include-
Amendment of Table of Contents of Act 32 of 2000
30. The Table of Contents of the principal Act is herttby amended-
((/) by the substitution for the references to sections 9 and 10 ot’ the tollo ing
references:
15
“9. Assignment of functions or powers to municipalities yenerall! by .Act of
10. Assignment of functions or powers to specitic nlunicipalirie b! act of
(h) by the insertion after the reference to section IO of the follou ing reterencc: 3)
((‘1 by the insertion after the reference to section 21 of the follo\~in: retercnw
Parliament
or provincial Acts
executive or
by agreement”;
“10A. Funding and capacity building”:
“21A. Documents to be made public
2 1 B. Oficial website” ;
“46. Annual performance reports”:
(dl by the substitution for the reference to section 46 of the t’ollo~ ing reterence: 25
(P) by the substitution for the reference to Part 4 of Chapter ,Y ot’ the folio ing
reference:
“Part 4: Internal municipal service districts”
“Part
4A: Regulations arld guideliues regarding
municipal services
(fl by the insertion after the reference to section X6 of the follo\.ing ret’ercncc: 30
86A. Regulations and guidelines regarding municipal WI ice
CHAPTER 8A
Part 1: General provisions
Part
2: Private conyanies
MUNICIPAL ENTITIES .> 3 ?-
86B. Kinds of municipal entities
86C. Establishment and acquisition of pri.ate companie
86D. Legal Status
of private companies rstablished b! municipalitieh or 40
86E. Conditions precedent for establishing or accluiring intereht in
,86F. Conditions precedent for co-onming of pri,ate companies
86G. Disposal of companies and equity interests
in companie 45
Part 3: Service utilities
86H. Establishment
861. Legal status of service utilities
865. Conditions precedent for establishing ser.ice utilities
86K. Disestablishment of service utilities 5 0
in which municipalities hold interests
private companies
Part 4: Multi-jurisdictional service utilities” :
(g) by the substitution for the references to section 87. 88. 89 and clti 01′ thc
“87. Establishment of multi-jurisdictional
[municipal service dis-
88. Minister requesting [the] establishment of multi-jllrisdictional
89. Contents of agreements establishing rnulti-jurisdiction31 [municipal
following references:
tricts] service utilities 55
[municipal service districts] servicc utilities
service districts] service utilities

1.4 No. 25960 CiO.’ERS.I~~T(;r~LhTTI, ;(I I \i !<~T .’I,”- Act No. 44.2003 LOCAL GOVERNMENT. MUNICIPAL SYSTEMS AMENDMENT ACT. 2003 90. Legal status of [governing bodies] multi-jurisdictio~l~~l scn ICC utilities”; (11) by the deletion of the reference to section 91: (i) by the substitution for the references to sections 92 and 93 of the tollo ing references: “92. Control of [governing bodies of] multi-jurisdictional [municipal 93. Termination of multi-jurisdiction~~l [municipal service districts] service districts] service utilitie!, service utilities”; (j) by the insertion after the reference to section 93 of the following reterences: IO “Part 5: Duties and responsibilities of parent tmnicipulities 93A. Duties of parent municipality with respect to municipal entilie ~ 93B. Parent municipalities having sole control 93C. Parent municipalities having shared control 1 93D. Municipal representatives i I5 Part 6: Governance of municipal entities 1 93E. Appointment of directors 93F. Disqualifications ! 93G. Removal or recall of directors I 93H. Duties of directors ~ ‘0 931. Meetings of board of directors 935. Appointment of chief executive officer ~ 93K. Establishment of and acquisition of interests in corporate bodies 1 93L. Code of Conduct for directors and members of staff of municipal i i Part 7: General i disallowed ~ ’5 I -. entlty”; and Ik) by the insertion after the reference to item 14 of Schedule 2 of the following reference: “ 14A. Disciplinary steps”. 30 Transitional provisions 31. (I ) If a municipality has established any corporate body. includiy a trust. undrr- or in terms of applicable legislation before this Act took effect. such a corporate hod!, continues to exist, despite the provisions of Chapter 8A of the principal Act. until such corporate body is disestablished or liquidated, as the case may be. (2) A corporate body, including a trust, referred to in subsection ( 1 ) must be regarded as a municipal entity for the purposes of this Act. the principal Act and ths Local Government: Municipal Finance Management Act. 2003. to the extent that the provisions of those Acts can be applied. nust within three months after this Act takes effect. publish a list of all such corporate bodies in the relevant provincial gazette and make that list public in terms of section 2 I A of the principal Act. 7- .13 (3) A municipality that has established a corporate body referred to in subsection ( I ). 40 (4) If. before this Act took effect - (a) a municipality or municipal entity has established a company referred to in 45 section 21 of the Companies Act, 1973 (Act No. 61 of 1973). the municipalit!. or the parent municipality of the municipal entity may. despite that Act. pass a by-law converting the company into a service utility under the sole control of the municipality or parent municipality; or (b) two or more municipalities have established a company referred to in section 50 21 of the Companies Act, 1973 (Act No. 61 of 1973). those municipalities may, despite that Act, enter into an agreement converting the company into a multi-jurisdictional service utility under the shared control of those munici- palities. (5) A by-law referred to in subsection (4)(a) and an agreement referred to in 55 subsection (4)(b) - (a) must substantially comply with sections 86H (2) and 89. respectively. of the principal Act; and Act No. 44, 2003 LOCAL GOVERNMENT MUNICIPAL SYSTEMS AMENDMEN r ACT. ~o.3 Ih) may provide for such transitional and other pro1 ision as ma! be necesar! 10 effectively convert the company into a service utilit! or ~~~~~lti-~~l~-i~~~i~ti~~~~,~l service utility, as the case may be. Short title and commencement 32. This Act is called the Local Government: Municipal Systems Atnenciment Act. 5 1003. and takes effect on a date determined by the President b!, proclamation in Ilw Gnzettr.

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