FINANCE DIRECTORATE,
SHAREHOLDING MANAGEMENT DEPARTMENT
MUNICIPAL ENTITY
QUARTERLY NEWSLETTER
Analyst
Quarter 1 – 1 July to 30 September 2007, ISSUE NO. 02
This is the second of a series of newsletters developed by the Shareholding Management
Department, a unit within the Finance Directorate established to monitor the municipal entities of
the City of Cape Town.
As parent municipality to the municipal entities we aim to keep our municipal entity boards of
directors and staff abreast of all current news, legislation and policies directly affecting the
municipal entities. This will enable directors to be continuously informed as well as ensuring that
we meet the legislative requirement as parent municipality to ensure that both the municipality and
the municipal entity comply with the Municipal Systems Act, the Local Government: Municipal
Finance Management Act and any other applicable legislation.
Contents
The newsletter’s intend to convey information relating to the Local Government: Municipal Finance
Management Act, Local Government: Systems Act, Companies Act, Corporate Governance and any
information relevant to municipal entities.
THE LOCAL GOVERNMENT LEGISLATION:
THE MUNICIPAL FINANCE MANAGEMENT ACT:
Regulations, Gazettes & National Treasury Circulars

Exemptions from the MFMA sections 122 (2) and (3) - Gazette No 30013, 29 June
2007. The Exemptions relate specifically to the consolidation of the Annual Financial
Statements where all high capacity municipalities (including the City) are exempted from
complying with the provisions of section 122(2) of the MFMA to prepare consolidated
financial statements for the 2006/07 and 2007/08 financial years. Exemptions in respect of
section 122(3) are to the extent they are required and applicable to both the municipality
and the municipal entities. For the municipal entities the exemptions are applicable from
2006/07 to 2008/09 financial years and are subject to certain conditions fully outlined in the
notice which took effect on 30 June 2007.
The City of Cape Town has chosen to continue with the requirements of S 122(3)
and (3) as it has already met this standard, and have inform National Treasury
accordingly.
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
Supply Chain Management: Lapsing of Exemptions from Regulations –
In terms of Government Notice 44 of 18 January 2006, municipalities and municipal entities
were exempted from Regulation 44 of the Supply Chain Management Regulations.
Regulation 44 prohibits awards to persons in the service of the state. The exemption
permitted, under certain circumstances, the award by a municipal entity to its directors. The
exemption lapsed on 30 June 2007, and Regulation 44 is now of full force and effect.

National Treasury has a very useful website which contains all the latest information on and
circulars
related
to
the
MFMA.
The
web
address
is:
http://www.treasury.gov.za/legislation/mfma/
OTHER NEWS

Zenobia Heldsinger has resigned from the City and is returning to Johannesburg, to work as
the company secretary of Metrobus, a City of Johannesburg municipal entity. Zenobia will
be missed by the Shareholding Management Department. Her dedication and positive
outlook on life will be a major asset for her new employer. We wish her all the best for her
new career.

Annastina Taunyane has returned from maternity leave after giving birth to a healthy son,
named Keabetswe. Annastina is the corporate governance expert for the Shareholding
Management Department and can be contacted on 021 400 2373.

Mallinicks In Brief: Corporate Law Reform
Mallinicks Attorneys have produced an informative bulletin on corporate law reform, which is
attached.

Annual Report: Opinion on effectiveness of Board, Board Committees and Directors
A recent British survey by PrinceWaterhouseCoopers, which involved 50 companies in the
FTSE 100 and 25 in the FTSE 250, found that only 36 per cent provided an opinion on the
effectiveness of the Board, Board Committees and Directors. Others commented on the
evaluation procedure.
It would seem that a far lower percentage of South African listed companies are willing and
able to report on the effectiveness of the Board and Board Committee.
(Reference: Corporate Governance – The Technical Newsletter of the SA Institute of Chartered
Secretaries and Administrators – Issue no 104, September 2007)
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
Do AGM’s serve a worthwhile purpose?
A recent survey amongst British directors has shown:
 85% of directors and company secretaries do not consider that AGM’s serve a
worthwhile purpose.
 Those interviewed only awarded 3 out of 10 points to the “useful” role of AGM’s.
Most felt that AGM’s were meaningless.
 With many serious major investors not seeing a purpose in attending AGM’s, the
vocal minorities, who often use AGM’s for their own purposes, are being given a
platform which exaggerates their economic and voting power.
The opinion of British directors and company secretaries has led to the British Government
being asked to look at the need for AGM’s.
In South Africa, unless key speakers are used, AGM’s often only last 5 minutes. The growing
trend of voting by means of a poll has resulted in even shorter AGM’s .
(Reference: Corporate Governance – The Technical Newsletter of the SA Institute of Chartered
Secretaries and Administrators – Issue no 104, September 2007
Please contact Louise Muller (021 4003940) or Richard Wootton (021 4002701) if you have any
queries in respect of this newsletter.
Although every effort is made to check the accuracy and quality of the information supplied, The
City cannot be held responsible for any errors that may arise.
Copyright(c) City of Cape Town 2007. All rights reserved. No part of this newsletter may be reproduced or transmitted in any form
without written permission from the City of Cape Town, Finance Directorate, Shareholding Management Department.
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