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Local Government: Municipal Finance Management Act, 2003 (Act No. 56 of 2003)

Chapter 11 : Goods and Services

Part 2 : Public-private partnerships

120. Conditions and process for public-private partnerships

 

(1) A municipality may enter into a public-private partnership agreement, but only if the municipality can demonstrate that the agreement will—
(a) provide value for money to the municipality;
(b) be affordable for the municipality; and
(c) transfer appropriate technical, operational and financial risk to the private party.

 

(2) A public-private partnership agreement must comply with any prescribed regulatory framework for public-private partnerships.

 

(3) If the public-private partnership involves the provision of a municipal service, Chapter 8 of the Municipal Systems Act must also be complied with.

 

(4) Before a public-private partnership is concluded, the municipality must conduct a feasibility study that—
(a) explains the strategic and operational benefits of the public-private partnership for the municipality in terms of its objectives;
(b) describes in specific terms—
(i) the nature of the private party’s role in the public-private partnership;
(ii) the extent to which this role, both legally and by nature, can be performed by a private party; and
(iii) how the proposed agreement will—
(aa) provide value for money to the municipality;
(bb) be affordable for the municipality;
(cc) transfer appropriate technical, operational and financial risks to the private party; and
(dd) impact on the municipality’s revenue flows and its current and future budgets;
(c) takes into account all relevant information; and
(d) explains the capacity of the municipality to effectively monitor, manage and enforce the agreement.

 

(5) The national government may assist municipalities in carrying out and assessing feasibility studies referred to in subsection (4).

 

(6) When a feasibility study has been completed, the accounting officer of the municipality must—
(a) submit the report on the feasibility study together with all other relevant documents to the council for a decision, in principle, on whether the municipality should continue with the proposed public-private partnership;
(b) at least 60 days prior to the meeting of the council at which the matter is to be considered, in accordance with section 21A of the Municipal Systems Act—
(i) make public particulars of the proposed public-private partnership, including the report on the feasibility study; and
(ii) invite the local community and other interested persons to submit to the municipality comments or representations in respect of the proposed public-private partnership; and
(c) solicit the views and recommendations of—
(i) the National Treasury;
(ii) the national department responsible for local government;
(iii) if the public-private partnership involves the provision of water, sanitation, electricity or any other service as may be prescribed, the responsible national department;
(iv) any other national or provincial organ of state as may be prescribed.

 

(7) Part 1 of this Chapter applies to the procurement of public-private partnership agreements. Section 33 also applies if the agreement will have multi-year budgetary implications for the municipality within the meaning of that section.