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18 March 2024

Proposed Amendments To The Municipal PPP Regulations In A Bid To Strengthen Procurement Systems

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The Minister of Finance has introduced the Municipal Public-Private Partnership Regulations of 2005 ("PPP Regulations"). The PPP Regulations are issued in terms of the Local Government...
South Africa Government, Public Sector

The Minister of Finance has introduced the Municipal Public-Private Partnership Regulations of 2005 ("PPP Regulations"). The PPP Regulations are issued in terms of the Local Government: Municipal Finance Management Act, 2003 ("MFMA"), and give further effect to section 120 of the MFMA which introduces and regulates municipal PPPs. The proposed amendments aim to enhance the quality of PPP planning, as well as transparency and efficiency in the procurement of municipal PPPs. These amendments, open for public comment until 20 March 2024, signify a step towards streamlining the PPP procurement process and ensuring effective governance in relation to such projects.

Expansion of feasibility studies

Regulation 3 requires municipalities to conduct feasibility studies for potential PPPs. Specifically, it mandates an assessment of the municipality's needs, including an exploration of the various options available to satisfy those needs, and an analysis of the advantages and disadvantages of each option.

The proposed amendment expands the original regulation by requiring that the needs analysis component of the feasibility study must include an assessment of the direct and indirect costs and benefits associated with the project, including the expected effect of any service delivery mechanism on the environment and human health, well-being, and safety.

Enhancing municipal accountability

Regulation 4, which governs PPP procurement, clarifies that the award of a PPP agreement is subject to completion of the municipal approval process provided for in section 120(6) of the MFMA, in particular: the completion of the PPP feasibility study, a public participation process and comments from National and the relevant provincial treasury and other relevant departments.

The proposed amendments to Regulation 4 also:

  • mandates that municipalities must proceed with the procurement of a PPP project, once the municipal approval has been obtained in terms of section 120(6) of the MFMA;
  • requires municipalities to adhere to procurement timelines rigorously; failing which they must inform the National Treasury of delays, along with reasons and details of the steps taken to mitigate the delay;
  • stipulates that municipalities may only cancel or suspend a PPP procurement process after consulting the National Treasury and submitting a detailed report addressing matters including the reasons for the decision, its justifiability, good faith execution, and what is in the municipality's best interests; and
  • exempts PPP projects with an estimated total project cost below R2 billion from certain procedural requirements under the PPP Regulations, in particular from the requirement to solicit the views and recommendations of the National Treasury and relevant provincial treasury on draft bid documents and the appointment of a preferred bidder at least 30 days before the decision to issue / award is made. However, it replaces those requirements with an obligation to consult the PPP Advisory Unit in the Government Technical Advisory Unit (GTAC) on the draft procurement documents, and on any proposed decision to pre-qualify bidders or appoint a preferred bidder. The proposed amendment also requires the accounting officer (municipal manager) to authorise and sign off on all project preparation and procurement documents, after consideration of comments from the PPP Advisory Unit.

In conclusion, the proposed amendments to the PPP Regulations amplify the costing requirements in a needs analysis; obligate municipalities to proceed with PPP procurement where the council has approved the PPP feasibility study after stakeholder engagements; confirm the role of the PPP Advisory Unit in PPP procurement; consolidate oversight of PPPs in the National Treasury; limit the involvement of the provincial treasuries; and expand the ambit of responsibility of the municipal manager in relation to the procurement documents. These changes seek to mitigate risks and maximise the benefits of private sector involvement in municipal service delivery.

If effectively implemented, these amendments could streamline processes, foster responsible governance, and improve the delivery of municipal services through PPPs, benefiting municipalities and communities alike.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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