Municipal Cost Containment Regulation

Government Gazette
Staatskoerant REPUBLIC OF SOUTH AFRICA
REPUBLIEK VAN SUID AFRIKA
Vol. 648 7
June
Junie 2019 No. 42514
9 7 7 1 6 8 2 5 8 4 0 0 3
ISSN 1682-5843
42514

LOCAL GOVERNMENT: MUNICIPAL FINANCE MANAGEMENT ACT, 2003
MUNICIPAL COST CONTAINMENT REGULATIONS, 2019
The Minister of Finance has, acting with the concurrence of the Minister of Cooperative
Governance and Traditional Affairs, in terms of section 168(1) of the Local Government:
Municipal Finance Management Act, 2003 (Act No. 56 of 2003), made the Regulations as
set out in the Schedule.
This gazette is also available free online at www.gpwonline.co.za
STAATSKOERANT, 7 JUNIE 2019 No. 42514 71
NATIONAL TREASURY
NOTICE 317 OF 2019
317 Local Government: Municipal Finance Management Act (56/2003): Municipal Cost Containment Regulations, 2019 42514
SCHEDULE

TABLE OF CONTENTS
1 Definitions
2. Object of Regulations
3. Application of Regulations
4. Cost containment policies
5. Use of consultants
6. Vehicles used for political office -bearers
7. Travel and subsistence
8. Domestic accommodation
9. Credit cards
10. Sponsorships, events and catering
11. Communication
12. Conferences, meetings and study tours
13. Other related expenditure items
14. Enforcement procedures
15. Disclosures of cost containment measures
16. Short title and commencement

Definitions

1. In these Regulations, a word or expression to which a meaning has been assigned in the Act
has the same meaning as in the Act, unless the context indicates otherwise, and-
“Act” means the Local Government: Municipal Finance Management Act, 2003 (Act No. 56
of 2003);
“consultant” means a professional person, individual, partnership, corporation, or a
company appointed to provide technical and specialist advice or to assist with a design and
implementation of projects or to assist a municipality or municipal entity to perform its
functions to achieve the objects of local government in terms of section 152 of the
Constitution;
“cost containment” means measures implemented to curtail spending in terms of these
regulations; and
“credit card” means a card issued by a financial services provider, which creates a revolving
account and grants a line of credit to the cardholder.
Object of Regulations

2. The object of these Regulations, in line with sections 62(1)(a), 78(1)(b), 95(a) and 105(1)(b) of
the Act, is to ensure that resources of a municipality and municipal entity are used effectively,
efficiently and economically by implementing cost containment measures.
Application of Regulations

3. These Regulations apply to all officials and political office bearers in municipalities and
municipal entities.
This gazette is also available free online at www.gpwonline.co.za
72 No. 42514 GOVERNMENT GAZETTE, 7 JUNE 2019
containment policies

4. (1) Each municipality or municipal entity must develop or revise and implement a cost
containment policy which must –
(a) in the case of a municipality, be adopted by the municipal council, and in the case of a
municipal entity, by the board of directors as part of its budget related policies;
(b) define a municipality or municipal entity’s objectives for the use of consultants; and
(c) be consistent with the Act and these Regulations.
(2) The cost containment policy of a municipality or a municipal entity contemplated in sub –
regulation (1) must –
(a) be in writing;
(b) give effect to these Regulations;
(c) be reviewed annually, as may be appropriate;
(d) be communicated on the municipality’s or municipal entity’s website; and
(e) set out –
(i) monitoring measures for ensuring implementation of the policy;
(ii) procedures for the annual review of the policy; and
(iii) consequences for non -adherence to the measures contained therein.
Use of consultants

5. (1) A municipality or municipal entity may only appoint consultants if an assessment of the
needs and requirements confirms that the affected municipality or municipal entity does not
have the requisite skills or resources in its full -time employ to perform the function.
(2) An accounting officer must adopt a fair and reasonable remuneration framework for
consultants taking into account the rates –
(a) determined in the “Guideline on fees for audits undertaken on behalf of the Auditor –
General of South Africa “, issued by the South African Institute of Chartered
Accountants;
(b) set out in the “Guide on Hourly Fee Rates for Consultants “, issued by the Department
of Public Service and Administration; or
(c) as prescribed by the body regulating the profession of the consultant.
(3) The tender documentation for the appointment of consultants must include a clause that the
remuneration rates will be subject to negotiation, not exceeding the applicable rates
mentioned in sub -regulation (2).
(4) When negotiating cost -effective consultancy rates for international consultants, the
accounting officer may take into account the relevant international and market -determined
rates.
(5) When consultants are appointed, an accounting officer must –
(a) appoint consultants on a time and cost basis with specific start and end dates;
(b) where practical, appoint consultants on an output- specified basis, subject to specific
measurable objectives and associated remuneration;
(c) ensure that contracts with consultants include overall cost ceilings by specifying
whether the contract price is inclusive or exclusive of travel and subsistence
disbursements;
(d) ensure the transfer of skills by consultants to the relevant officials of a municipality or
municipal entity;
(e) undertake all engagements of consultants in accordance with the Municipal Supply
Chain Management Regulations, 2005 and the municipality or municipal entity’s
supply chain management policy; and
(f) develop consultancy reduction plans to reduce the reliance on consultants.
(6) All contracts with consultants must include a fee retention or penalty clause for poor
performance.
(7) A municipality or municipal entity must ensure that the specifications and performance are
used as a monitoring tool for the work to be undertaken and are appropriately recorded and
monitored.
(8) The travel and subsistence costs of consultants must be in accordance with the national
travel policy issued by the National Department of Transport, as updated from time to time.
(9) The contract price must specify all travel and subsistence costs and if the travel and
subsistence costs for appointed consultants are excluded from the contract price, such costs
must be reimbursed in accordance with the national travel policy of the National Department
of Transport.
Vehicles used for political office -bearers

6. (1) The threshold limit for vehicle purchases relating to official use by political office -bearers
must not exceed R700 000 or 70% (VAT inclusive) of the total annual remuneration package
for the different grades of municipalities, as defined in the Public Office Bearers Act and the
notices issued in terms thereof by the Minister of Cooperative Governance and Traditional
Affairs, whichever is lower.
(2) The procurement of vehicles in sub -regulation (1) must be undertaken using the national
government transversal contract mechanism, unless it may be procured at a lower cost
through other procurement mechanisms.
(3) Before deciding to procure a vehicle as contemplated in sub -regulation (2), the accounting
officer or delegated official must provide the council with information relating to the following
criteria which must be considered:
(a) status of current vehicles;
(b) affordability of options including whether to procure a vehicle as compared to rental or
hire thereof, provided that the most cost effective option is followed and the cost is
equivalent to or lower than that contemplated in sub -regulation (1);
(c) extent of service delivery backlogs;
(d) terrain for effective usage of the vehicle; and
(e) any other policy of council.
(4) If the rental referred to in sub -regulation (3) is preferred, the accounting officer must review
the costs incurred regularly to ensure that value for money is obtained.
(5) Regardless of their usage, vehicles for official use by political office bearers may only be
replaced after completion of 120 000 kilometres.
(6) Notwithstanding sub -regulation (5), a municipality or municipal entity may replace a vehicle
for official use by political office bearers before the completion of 120 000km only in
instances where the vehicle has a serious mechanical problem and is in a poor condition
and subject to obtaining a detailed mechanical report by the vehicle manufacturer or
approved dealer.
(7) An accounting officer must ensure that there is a policy that addresses the use of municipal
vehicles for official purposes.
Travel and subsistence

7. (1) An accounting officer –
(a) may approve the purchase of economy class tickets for all officials or political office
bearers where the flying time for the flights is five hours or less; and
(b) may only approve the purchase of business class tickets for officials, political office
bearers and persons reporting directly to the accounting officer for flights exceeding
five hours.
(2) In the case of the accounting officer, the mayor may approve the purchase of economy
class tickets where the flying time is five hours or less and business class tickets for flights
exceeding five hours.
(3) Notwithstanding sub -regulation (1) or (2), an accounting officer, or the mayor in the case of
an accounting officer, may approve the purchase of business class tickets for an official or a
political office bearer with a disability or a medically certified condition.
(4) The cost containment policy must limit international travel to meetings or events that are
considered critical. The number of officials or political office bearers attending such
meetings or events must be limited to those officials or political office bearers directly
involved in the subject matter related to such meetings or events.
(5) An accounting officer, or the mayor in the case of the accounting officer, may approve
accommodation costs that exceed an amount as determined from time to time by the
National Treasury through a notice only –
(a) during peak holiday periods; or
(b) when major local or international events are hosted in a particular geographical area
that results in an abnormal increase in the number of local and /or international guests
in that particular geographical area.
(6) An official or a political office bearer of a municipality or municipal entity must –
(a) utilise the municipal fleet, where viable, before incurring costs to hire vehicles;
(b) make use of available public transport or a shuttle service if the cost of such a service
is lower than –
(i) the cost of hiring a vehicle;
(ii) the cost of kilometres claimable by the official or political office bearer; and
(iii) the cost of parking.
(c) not hire vehicles from a category higher than Group B or an equivalent class; and
(d) where a different class of vehicle is required for a particular terrain or to cater for the
special needs of an official, seek the written approval of the accounting officer before
hiring the vehicle.
(7) A municipality or a municipal entity must utilise the negotiated rates for flights and
accommodation as communicated from time to time by the National Treasury through a
notice or any other available cheaper flight and accommodation.
Domestic accommodation

8. (1) An accounting officer must ensure that costs incurred for domestic accommodation and
meals are in accordance with the maximum allowable rates for domestic accommodation
and meals as communicated from time to time by the National Treasury through a notice.
(2) Overnight accommodation may only be booked where the return trip exceeds 500
kilometres.
Credit cards

9. (1) An accounting officer must ensure that no credit card or debit card linked to a bank account
of a municipality or a municipal entity is issued to any official or political office bearer,
including members of the board of directors of municipal entities.
(2) Where officials or political office bearers incur expenditure in relation to official municipal
activities, such officials or political officer bearers must use their personal credit cards or
cash or arrangements made by the municipality or municipal entity, and request
reimbursement in accordance with the written approved policy and processes.
Sponsorships, events and catering

10. (1) A municipality or municipal entity may not incur catering expenses for meetings which are
only attended by persons in the employ of the municipality or municipal entity, unless the
prior written approval of the accounting officer is obtained.
(2) An accounting officer may incur catering expenses for the hosting of meetings, conferences,
workshops, courses, forums, recruitment interviews, and proceedings of council that exceed
five hours.
(3) Entertainment allowances of qualifying officials may not exceed two thousand rand per
person per financial year, unless approved otherwise by the accounting officer.
(4) A municipality or municipal entity may not incur expenses on alcoholic beverages unless the
municipality or the municipal entity recovers the cost from the sale of such beverages.
(5) An accounting officer must ensure that social events, team building exercises, year -end
functions, sporting events and budget vote dinners are not financed from the municipality or
the municipal entity’s budgets or by any suppliers or sponsors.
(6) A municipality or municipal entity may not incur expenditure on corporate branded items like
clothing or goods for personal use of officials, other than uniforms, office supplies and tools
of trade unless costs related thereto are recovered from affected officials or is an integral
part of the business model.
(7) An accounting officer may incur expenditure not exceeding the limits for petty cash usage to
host farewell functions in recognition of officials who retire after serving the municipality or
municipal entity for ten or more years or retire on grounds of ill health.
Communication

11. (1) A municipality or municipal entity may, as far as possible, advertise municipal related events
on its website instead of advertising in magazines or newspapers.
(2) An accounting officer must ensure that allowances to officials for private calls and data costs
are limited to an amount as determined by the accounting officer in the cost containment
policy of the municipality or municipal entity.
(3) Newspapers and other related publications for the use of officials must be discontinued on
expiry of existing contracts or supply orders, unless required for professional purposes and
where unavailable in electronic format.
(4) A municipality or municipal entity may participate in the transversal term contract arranged
by the National Treasury for the acquisition of mobile communication services.
Conferences, meetings and study tours

12. (1) An accounting officer must establish policies and procedures to manage applications to
attend conferences or events hosted by professional bodies or non -governmental
institutions held within and outside the borders of South Africa taking into account their
merits and benefits, costs and available alternatives.
(2) When considering applications from officials or political office bearers to attend conferences
or events within and outside the borders of South Africa, an accounting officer or mayor as
the case may be, must take the following into account –
(a) the official’s or political office bearer’s role and responsibilities and the anticipated
benefits of the conference or event;
(b) whether the conference or event addresses relevant concerns of the institution;
(c) the appropriate number of officials or political office bearers, not exceeding three,
attending the conference or event; and
(d) the availability of funds to meet expenses related to the conference or event.
(3) An accounting officer may consider appropriate benchmark costs with other professional
bodies or regulatory bodies prior to granting approval for an official to attend a conference or
event within and outside the borders of South Africa.
(4) The benchmark costs referred to in sub -regulation (3) may not exceed an amount as
determined from time to time by the National Treasury through a notice.
(5) The amount referred to in sub -regulation (4) excludes costs related to travel,
accommodation and related expenses, but includes –
(a) conference or event registration expenses; and
(b) any other expense incurred in relation to the conference or event.
(6) When considering costs for conferences or events these may not include items such as
laptops, tablets and other similar tokens that are built into the price of such conferences or
events.
(7) The accounting officer of a municipality or municipal entity must ensure that meetings and
planning sessions that entail the use of municipal funds are, as far as may be practically
possible, held in- house.
(8) Municipal or provincial office facilities must be utilised for conference, meetings, strategic
planning sessions, inter alia, where an appropriate venue exists within the municipal
jurisdiction.
(9) An accounting officer must grant the approval for officials and in the case of political office
bearers and the accounting officer, the mayor, as contemplated in sub -regulation (2).
(10) A municipality or municipal entity must, where applicable, take advantage of early
registration discounts by granting the required approvals to attend the conference, event or
study tour, in advance.

13. (1) All commodities, services and products covered by a transversal contract concluded by the
National Treasury must be considered before approaching the market, to benefit from
savings where lower prices or rates have been negotiated.
(2) Municipal resources may not be used to fund elections, campaign activities, including the
provision of food, clothing, printing of agendas and brochures and other inducements as part
of, or during election periods or to fund any activities of any political party at any time.
(3) Expenditure on tools of trade for political office bearers must be limited to the upper limits as
approved and published by the Cabinet member responsible for local government in terms of
the Remuneration of Public Office Bearers Act, 1998.
(4) A municipality or municipal entity must avoid expenditure on elaborate and expensive office
furniture.
(5) A municipality or municipal entity may only use the services of the South African Police
Service to conduct periodical or quarterly security threat assessments of political office
bearers and key officials and a report must be submitted to the speaker’s office.
(6) A municipality or municipal entity may consider providing additional time -off in lieu of
payment for overtime worked. Planned overtime must be submitted to the relevant manager
for consideration on a monthly basis. A motivation for all unplanned overtime must be
submitted to the relevant manager.
(7) A municipality or municipal entity must ensure that due process is followed when suspending
or dismissing officials to avoid unnecessary litigation costs.
Enforcement Procedures

14. Failure to implement or comply with these Regulations may result in any official of the
municipality or municipal entity, political office bearer or director of the board that authorised or
incurred any expenditure contrary to these regulations being held liable for financial misconduct
or a financial offence in the case of political office bearers as defined in Chapter 15 of the Act
read with the Municipal Regulations on Financial Misconduct Procedures and Criminal
Proceedings, 2014.
Disclosures of cost containment measures

15. (1) The disclosure of cost containment measures applied by the municipality and municipal
entity must be included in the municipal in -year budget reports and annual costs savings
disclosed in the annual report.
(2) The measures implemented and aggregate amounts saved per quarter, together with the
regular reports on reprioritisation of cost savings and on the implementation of the cost
containment measures must be submitted to the Municipal Council for review and resolution.
The municipal council can refer such reports to an appropriate Council Committee for further
recommendations and actions.
(3) The reports referred to in sub -regulation (2) must be copied to the National Treasury and the
relevant provincial treasury within seven calendar days after the report is submitted to
municipal council.
Short title and commencement

16. These Regulations are called the Municipal Cost Containment Regulations, 2019 and take
effect on 1 July 2019.

Municipal Cost Containment Regulations, 2019

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