NJRT
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Transcript of NJRT
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SECTION 78(3) – A GUIDE SECTION 78(3) – A GUIDE TO THE PROCESSTO THE PROCESS
Understanding and using the s78(3) Understanding and using the s78(3) process to achieve meaningful process to achieve meaningful
results results
National Joint Response Team - DWAF, SALGA, NT and dplgNational Joint Response Team - DWAF, SALGA, NT and dplg
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Getting value from your s78(3) process It is important for a WSA to “own” its s78 process so that it can
guide the process to ensure that the results best suit its needs and circumstances. In order to achieve this the following may be required of the WSA:
Think strategically about your s78 goals
Reflect on s78(1) process & build on it
Scope your s78(3) assessment
Understand what is meant by an external mechanism & consider creative variations
Understand the s78(3) process
Understand the s78(3) feasibility study
Consider all legislative and other relevant issues when deciding on an external mechanism
Consider lessons from other municipalities
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Before You Start
Give notice to the community of intention to explore external mechanisms
Remind yourself of the purpose of a s78 assessment:
It is is to place the WSA in a position to make an informed strategic decision i.r.o an appropriate service delivery mechanism (internal, external or a combination of the two)
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Before You Start An informed strategic decision will probably
need to take into account:
practical & technical service delivery issues;
prescribed legislative criteria;
political aspirations of the WSA; and
the over-all business strategy of the WSA
In other words your choice of mechanism must be implemental, have political support and make good business sense
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Before You Start
This means that the WSA has an important role to play in its s78 process, even if consultants are appointed
The WSA must do more than simply apply the s78 legislative criteria – it must think strategically about:
what it wants to achieve politically & from a strategic business perspective (goals)?
what it already has with which to work (and still needs) to reach its goal (status quo)?
what obstacles or challenges hamper achievement of the goal (challenges)?
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Before You Start
Consider what you already know:
By the time that the WSA has completed the s78(1) assessment it should have a clear understanding of its goals, status quo and challenges
Do not view the s78(1) and s78(3) processes as a contest between internal vs external options – instead use the s78(3) process to consider whether & how an external mechanism might address concerns raised in the s78(1) process about an internal mechanism
Remember the mechanism chosen may be a combination of internal and external – or an external mechanism which will ultimately be converted to an internal mechanism
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Before You Start
Understand what is meant by an external mechanism
Understand the s78(3) legislative criteria & process
Define the SCOPE of the s78(3)
Understanding gained from the s78(1) process should be used in scoping the s78(3) assessment
Proper scoping should ensure that the application of the legislative criteria provides useful results – which speak specifically to the strategic goals of the particular WSA
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Before You Start
Consider whether other legislative processes may be relevant and whether these processes should be co-ordinated with the s78(3) process:
If you are considering a mechanism that involves a Public Private Partnership the MFMA s120 process will be applicable (Notice to National and Provincial Treasury; s120 feasibility study and transaction advisor)
If your choice of mechanism will have future budgetary implications exceeding 3 years the MFMA s33 process will be applicable
If your choice of mechanism is another municipality (including an LM in your area) that LM will need to comply with s80(3) of the Systems Act
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What is meant by an External What is meant by an External Mechanism?Mechanism?
External means any mechanism that is not the particular WSA municipality conducting the s78 assessment
LMs can be appointed as WSPs (external mechanism), or the can simply provide support services to an internal mechanism of the WSA (internal mechanism)
External mechanisms require a written agreement between the municipality and the external mechanism (Service Delivery Agreement)
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What is meant by an External What is meant by an External Mechanism?Mechanism?
External mechanisms listed in s76(b) of the Systems Act include: a municipal entity, another municipality, an organ of state, a CBO or NGO any other institution including a privately-owned
company. It is useful to distinguish public and private
external mechanisms as different procurement requirements apply
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What is meant by an External What is meant by an External Mechanism?Mechanism?
Municipal Entity Municipal Entity Another municipalityAnother municipality Organ of state (including a traditional authority) Organ of state (including a traditional authority)
CBOCBO NGONGO Any other institution or entity legally competent to Any other institution or entity legally competent to
operate a business activityoperate a business activity
External External mechanismsmechanisms
Competitive tenderingCompetitive tendering
Service D
elivery Ag
reemen
ts S
ervice Delivery A
greem
ents
mu
st be en
tered in
tom
ust b
e entered
into
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Overview of the s78(3) Process
Give notice to local community [s78(3)(a)]
ASSESS each s76(b) external mechanism (municipality, municipal entity, NGO, CBO, organ of state or private sector operator) against:
S78(3)(b) criteria [s78(3)(b)]
Other relevant factors
Conduct or commission FEASIBILITY STUDY of preferred mechanism/s [s78(3)(c)]
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Legislative Criteria for Assessment of External Mechanisms
In terms of s78(3)(b) the assessment of each external mechanism must take into account:
Direct and indirect costs and benefits [s78(3)(b)(i)]
Capacity and potential future capacity of prospective service providers [s78(3)(b)(ii)]
The likely impact on development, job creation and employment patterns [s78(3)(b)(iv)]
The views of the local community and organised labour [s78(3)(b)(iii) & (v)]
If there is no prospective delivery mechanism with the skills, expertise and resources necessary for the provision of the service for any category of delivery mechanisms identified in section 76(b), the assessment may state that there are no potential mechanisms in that category & provide reasons for this conclusion
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Other Non-Legislative Criteria for Assessment of External Mechanisms
Although not legislatively required, the assessment should also take into account:
The WSAs political, business & service delivery needs and challenges
Regulatory requirements of different external options
Issues relating to the required SDA:
Output specifications (what is it that you want the service provider to do?)
Risk Transfer (financial/operational/political/etc)
Contract Structure
Structure of relationship with service provider
Term of contract (relative to risk transfer)
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The Feasibility Study – Testing Preferred External Mechanism
Following the assessment of all possible external mechanisms against the s78(3)(b) criteria, the WSA should consider selecting preferred external options for the s78(3)(c) feasibility study
This selection of preferred mechanism is another opportunity for the WSA to guide the s78 process towards achieving the WSA’s strategic goals
The preferred options must be tested by means of the s78(3)(c) feasibility study
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The Feasibility Study – Legislative The Feasibility Study – Legislative Criteria:Criteria:
A s78(3) feasibility study must in terms of s78(3)(c):
Identify the municipal service for which the external mechanism is being considered [s78(3)(c)(i)]
Indicate the number of years for which the municipal service might be provided by the external mechanism [s78(3)(c)(ii)]
Consider the projected outputs which might be expected from providing the service through an external mechanism [s78(3)(c)(iii)]
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The Feasibility Study – Legislative The Feasibility Study – Legislative Criteria:Criteria:
A s78(3) feasibility study must in terms of s78(3)(c):
Assess how the preferred mechanism will
Provide Value for money [s78(3)(c)(iv)(aa)]
Address the needs of the poor [s78(3)(c)(iv)(bb)]
Be affordable [s78(3)(c)(iv)(cc)]
Transfer risk [s78(3)(c)(iv)(dd)]
Consider the projected impact on the WSAs:
staff, assets and liabilities [s78(3)(c)(v)]
IDP [s78(3)(c)(vi)]
Budget (impact on revenue, expenditure, borrowing, debt and tariffs) [s78(3)(c)(vii)]
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The Feasibility Study – “Value for The Feasibility Study – “Value for Money”Money”
Assessing VALUE FOR MONEY requires a comparison between doing a project “internally” and doing it through an “external” service provider looking at cost, price, quality, quantity and risk transfer
A project provides VALUE FOR MONEY if there is a net benefit to the municipality of doing the project through a so-called external mechanism
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The Feasibility Study – The Feasibility Study – “Affordability”:“Affordability”:
Even if a project provides value for money, it still needs to be affordable for a municipality given its budget
For it to be affordable there must be adequate budgetary provision made for the project
If a project is not affordable, it undermines a municipality’s ability to deliver other services and should not be pursued, even if there is value for money
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The Feasibility Study – “Risk The Feasibility Study – “Risk Transfer”:Transfer”:
RISK indicates a possibility that an event may not occur as planned when the parties agreed to do the project.
There are risks in every project and these must be identified and allocated between the parties
The s78(3) feasibility study considers whether the transfer of technical, operational and financial risk from the WSA to the external service provider is appropriate
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Legislatively prescribed things Legislatively prescribed things to consider when choosing to consider when choosing
your mechanisms your mechanisms After having completed your s78(3) process, s78(4)
requires that the municipality must decide on an appropriate internal or external mechanism, taking into account that s73 prescribes that municipal services must:
Be equitable & accessible
Be provided in a manner that is conducive to the prudent, economic, efficient & effective use of available resources & the improvement of standards of quality
Be financially sustainable
Be environmentally sustainable
Be regularly reviewed with a view to upgrading, extension & improvement
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What to think about when What to think about when considering external considering external
mechanismsmechanisms Other factors that may be considered when
deciding on an appropriate mechanism include:
Potential viable variations of the external service delivery mechanisms identified in section 76(b) of the Systems Act
Potential combinations of internal and external service delivery mechanisms
Affordability – matching needs (service levels) against revenue (tariffs collected and grant funding)
Securing and allocating grant funding – MIG for capital expenditure for poor
Formula for allocating equitable share to WSP to provide free basic services
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What to think about when What to think about when considering external considering external
mechanismsmechanisms Other factors that may be considered when
deciding on an appropriate mechanism include:
Responsibility of WSP to collect water revenue
Consolidated invoice or separate invoices
By-laws in place to allow revenue collection and credit control
Can you ring-fence the service?
What is the administrative capacity within your municipality to monitor performance of the WSP?
Are significant support services necessary for the proper functioning of the service being undertaken by the WSP?
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What to think about when What to think about when considering external considering external
mechanismsmechanisms Other factors that may be considered when deciding on an
appropriate mechanism include:
Can the external mechanism be used to build your WSA or WSP capacity?
What is the level of bureaucracy within your municipality? Is it/will it impede impeding service delivery?
Long term impact of institutional reform – DWAF Strategic Framework for Water Services talks about regionalisation of public sector water service providers?
Consultation with the national departments (DPLG/DWAF/NT) through the process mitigates risk of them no supporting your deal
Capacity of potential service providers to meet your specific needs?
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Council decision required for Council decision required for an external service delivery an external service delivery
mechanismmechanism
The “municipality” must, following the s78(3) process choose an appropriate mechanism [s78(4)]
The MUNICIPAL COUNCIL must make any decision to enter into a service delivery agreement with an external mechanism as the power to make this decision may NOT be delegated by the Council [s59(a)]
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The Chris Hani ExperienceThe Chris Hani Experience- Mechanism Chosen- Mechanism Chosen
Chris Hani DM has decided to use a combination of internal and external mechanisms
The four LMs in the west of CHDM will act as external WSPs (External Mechanism)
CHDM will act as internal WSP in the remainder of its area, with support services being provided to CHDM in terms of SSAs with the four eastern LMs
CHDM is looking at using this service delivery mechanism model for approximately 3-5 years
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The Chris Hani ExperienceThe Chris Hani Experience- Challenges Encountered- Challenges Encountered
A shortage of management capacity within the CHDM area
Limited participation of key councillors and officials
Limited “ownership” of process by CHDM (difficulty in conveying political & strategic business aspirations)
Initial confusion around whether LM WSPs are internal or external mechanism
Uncertainty regarding the s80 feasibility study required from the LMs
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The Chris Hani ExperienceThe Chris Hani Experience- Key Lessons- Key Lessons
The s78 process is a matter of selecting an appropriate service delivery mechanisms by balancing political aspirations with good business practice (within the constraints of municipal legislation)
Political aspirations of the municipality are key - Councilors should be actively involved in the s78 process & their views on how the service should be provided should be canvassed
Practicalities regarding implementation & the business-sense of the decision are key – the views of officials should be canvassed
Understanding the meaning and implications of all the legislative criteria is key
Remember that a short / medium-term mechanism can be used to carry you to your long-term goal
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THANK YOUTHANK YOU