FINANCE DIRECTORATE,
SHAREHOLDING MANAGEMENT DEPARTMENT
MUNICIPAL ENTITY
QUARTERLY NEWSLETTER
Analyst
2008/2009 Quarter 1: 1 July 2008 – 30 September 2008, ISSUE NO. 06
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:

Municipal Asset Transfer Regulations
National Treasury has promulgated Municipal Asset Transfer Regulations for
municipalities and municipal entities. The Regulations came into force on the
1 September 2008 and sets out the procedural requirements for both the sale and
lease of municipal entity owned capital assets. The Regulations also govern the
process for the transfer of capital assets between a municipality and its municipal
entities. The Regulations are onerous and need to be studied closely to ensure
compliance. A copy of the regulations is available at the National Treasury website:
http://www.treasury.gov.za/legislation/mfma/reg_gaz/1-31346%20228%20Nat%20Treas.pdf

Directors and Trustees bidding for an award by the City
Issue 4 of the Quarterly Newsletter dealt with the exemption of Regulation 44 of the
Supply Chain Regulations. The exemption allows a municipality to make an award to
a non executive director of a municipal entity. A municipal entity may make an award
to a director of another municipal entity (a municipal entity may not make an award
to one of its own directors). It is a requirement that a bidder disclose:
1. that he/she serves on the board of a municipal entity
2. that he/she serves as a executive or non executive board member
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3. the name of the municipal entity
If the bidder is not a natural person, then the name of any director, manager or
principal shareholder, who is a municipal entity director, must be disclosed.
These requirements pertain to Trustees as well.

New Budget Formats Guide
National Treasury has issued Budget Format Guides. One of the specific aims of the
budget formats guide is to ensure that a municipal entity will approve a budget on
the similar basis to its parent municipality in order to achieve effective financial
control. As the parent municipality and its municipal entities apply the same
accounting standards and budget, this will further assist in the consolidation of the
Annual Financial Statements.
The guidelines are available on the National Treasury Website at the following link:
http://www.treasury.gov.za/legislation/mfma/guidelines/budget%20formats/
default.aspx

Budget Submission 2009/2010
Section 87 of the MFMA mainly governs the preparation of the budget of a municipal
entity. It starts off by placing the responsibility on the board of directors or trustees
to submit a proposed budget for the entity to the parent municipality, not later than
150 days before the start of the entity’s financial year. This date may even be sooner
upon request by the parent municipality. Working this timeframe back to the
calendar means that the proposed budget must be submitted to the City by the end
of January of a particular year. It should however reach the City in time to be
included in the report submission process to Council. This starts early in the month of
January, as it needs to pass through various portfolio committees and the Mayoral
Committee before it is presented to Council. Therefore, the City requests that the
proposed budget reaches the City by no later than approx. 6 January 2009. The
practical implication of this is that with December being a holiday period, such a
proposed budget should be approved by the directors / trustees by the beginning of
December.
Section 87(5)(d) requires that the budget of a municipal entity must include a multiyear business plan for the entity that –
(i) set key financial and non-financial performance objectives and measurement
criteria as agreed with the parent municipality;
(ii) is consistent with the budget and integrated development plan (IDP) of the
entity’s parent municipality;
(iii) is consistent with any service delivery agreement (SDA) or other agreement
between the entity and the entity’s parent municipality; and
(iv)reflect actual and potential liabilities and commitments, including particulars of
any proposed borrowing of money during the period to which the plan relates.
Therefore, besides the budget, the business plan is a major document of importance
to the City, both of which take a long time to prepare. That is why the City on
commencement of the new financial year, immediately starts with the preparation of
the following years’ budget. It is important to note the various documents of the City
such as the IDP or SDA’s, must be considered when preparing the business plan.
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Section 87(5)(e) also requires that the budget must comply with section 17(1) and
(2) of the MFMA. Section 17(1) requires that the budget must be in the format as
prescribed by National Treasury. This format was changed recently by National
Treasury (see relevant article elsewhere in the newsletter). The changes are
substantial and will require proper planning and systems will need to be altered to
cater for the changes. The idea is however that the budget forms the starting point
for eventual reporting in the annual financial statements.
The central message to this article which we want to convey to you is therefore:
PLEASE START EARLY WITH YOUR 2009/10 BUDGET!
GENERAL:
Matters of Interest

Non Executive Directors Winter 2008 Report has been completed by
PriceWaterhouseCoopers. The report deals with best practices for non executive
director fees. The report may be found at:
http://www.pwc.com/za/eng/pdf/pwc_ned_winter_2008_report.pdf
Note: The PDF file is 3.88MB
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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