ETHEKWINI NEWS FLASH

FOR IMMEDIATE RELEASE

30 September 2015

Full Council Decisions 

CITY PLANS TO CURB EXCESSIVE USE OF SECTION 36

A report restricting the excessive use of Section 36 awards was approved at the Full Council seating today, 30 September 2015. This would continue to ensure transparent and good governance in the City.

While measures already implemented by the City have seen a reduction in the number of Section 36 awards issued, further measures outlined in the report would be implemented to monitor usage of Section 36. 

Section 36 should be used to procure required goods and services in cases of an emergency, if the required goods or services are produced or available from a single provider only, for the acquisition of special works of an art or historical objects where specifications are difficult to compile, the acquisition of animals for zoos and any other exceptional case where it is impractical or impossible to follow official procurement processes.

The methods presented in the report include the City Integrity and Investigations Unit investigating all matters of irregular expenditure to determine if there are any grounds for financial misconduct as a result of the excessive use of Section 36. Disciplinary action would be taken against an official if necessary.

The recommendations were outlined in the report by the Municipal Public Accounts Committee (MPAC) to Full Council which was held at the Ilfracombe Sportsground in Umkhomazi.

The report stated that if the use of Section 36 is not justifiable and results in irregular expenditure, the funds must be recovered from the person liable. Also all irregular expenditure must be adequately quantified and disclosed in the annual financial statements. 

All contracts that have been repeatedly awarded through Section 36 will be procured through a competitive bidding process, with procurement plans being developed for these contracts and compliance with Section 33 of the Municipal Finance Management Act being ensured.

MPAC suggested that the Bid Adjudication Committee will also thoroughly analyse and review Section 36 reports through the Business Systems Unit to ensure that Units are providing detailed reasons and motivation to substantiate the use of Section 36. Approval will not be granted in instances where the review of reports shows that the submission emanates from poor planning by the Units.

Management will also have to introduce proper control mechanisms for contract management to avoid unnecessary contract extension where Section 36 is used as a corrective measure for poor planning.

The final recommendation was that the Supply Chain Management Unit creates a centralised database for a pool of contractors with different expertise that will be utilised on a rotational basis for unforeseen events, such as fire, storm damage and floods, which Council has no control over.

The recommendations come after an investigation was initiated by MPAC following concerns that Section 36 was being used too frequently. The investigation was conducted by the Internal Audit Unit who reviewed contracts that were awarded by the City in terms of Supply Chain Management (SCM) Regulation 36. The Unit conducted a high-level review and analysis of reports for the period April to June of the 2014/2015 financial year.

The review of 32 Regulation 36 reports was done to evaluate whether the use of Section 36 was reasonable and justified, whether the correct application of subsection of Section 36 was utilised and to evaluate the amount of potential irregular expenditure in cases that were not justified. 

CITY TO GET R1 BILLION LOAN TO FUND CAPITAL PROJECTS

Full council today, 30 September 2015, approved a request to acquire a R1 billion to fund capital projects in the City. 

The City’s finances were in good shape and the approval of a R1 bn loan would not impact ratepayers, City officials emphasised at the meeting. 

This issue was first tabled at the Finance and Procurement Committee on 17 October 2015 and was merely procedural in terms of the Municipal Financial Management Act as the R1 bn had already been budgeted into the 2015/16 Financial Medium Term Revenue Framework. It will therefore not result in any additional tariffs increases for ratepayers. 

Loans are used to fund capital projects identified through the City’s prioritisation process from the previous year’s budget consultation process. The bulk of the loan will be mainly allocated to projects such as roads, electricity and water and sanitation.

Affordability is taken into account and is vital prior to any borrowings. EThekwini has strong financial indicators with the Municipality’s gearing ratio improving over the years. The Municipality has a very favourable gearing ratio that sits at 31.2 percent as of 31 August 2015 which is below the norm of 45 percent set by National Treasury. The City therefore has the capacity to further invest in capital projects. EThekwini’s short term credit rating A1+ and long term credit rating of AA- assessed by the Global Credit rating company is the highest awarded to any Municipality in the country. 

The loan has been budgeted and is geared to accelerating the Municipality’s commitment to service delivery and ensuring that infrastructure growth is key to ensuring the sustainability of the City. 

Chairwoman of the Finance and Procurement Committee Fawzia Peer defended the decision to acquire the loan saying various aspects were taken into consideration. She said the loan would not bankrupt the City, adding that the City has never been bankrupt.

ENDS 

Issued by eThekwini Municipality’s Communications Head, Tozi Mthethwa.

For more information members of the media can contact Gugu Sisilana on 031 311 4855 or email: gugu.mbonambi@durban.gov.za or Princess Nkabane on 031 311 4818 or princess.nkabane@durban.gov.za