BRIEFING TO THE PORTFOLIO COMMITTEE ON COGTA: LOCAL GOVERNMENT: UPPER LIMITS OF TOTAL REMUNERATION PACKAGES PAYABLE TO MUNICIPAL MANAGERS AND MANAGERS DIRECTLY ACCOUNTABLE TO MUNICIPAL MANAGERS 30 AUGUST 2016 1

Contents 2 Purpose Legislative context Component of the Notice Statistics on contract period for senior managers 2

Purpose The purpose is to brief the Portfolio Committee on Cooperative Governance and Traditional Affairs on the Local Government: Upper Limits of Total Remuneration Packages payable to Municipal Managers and Managers directly accountable to Municipal Managers 3

Legislative context The Constitution of the Republic of South Africa, 1996 (Act No. 108 of 1996) Section 154 of the Act provides that the national government and provincial governments, by legislative and other measures, must support and strengthen the capacity of municipalities to manage their own affairs, to exercise their powers and to perform their functions. 4

Legislative context Local Government: Municipal Systems Act, 2000 (Act No. 32 of 2000) Section 72(2A) of the the Systems Act empowers the Minister, subject to applicable labour legislation, and after consultation with the Minister for Public Service and Administration, the Minister of Finance, the MECs for local government and organized local government to: make regulations or issue guidelines relating to the duties, remuneration, benefits and other terms and conditions of employment of municipal managers and managers directly accountable to municipal managers (“senior managers”) 5

Legislative context Local Government: Regulations on appointment and conditions of employment of senior managers Regulation 35 of the Regulations empower the Minister by notice in the gazette annually determine the upper limit of total remuneration packages payable to senior managers according to different categories of municipalities and after taking into consideration the following : the classification of municipalities according to different grades; the respective duties, powers and functions and responsibilities of a municipality; the affordability of different levels of remuneration, the number of municipal employees, and the salary and wage bill of the municipality; 6

Legislative context the population, operating budget and assets of the municipality; the current principles and levels of remuneration in society in general; the need for the promotion of equality and uniformity of salaries, allowances and benefits for equal work performed; the provision of uniform norms and standards nationally to address disparities; and inflationary increases. 7

Legislative context Local Government: Upper limits of the total remuneration packages payable to municipal managers and managers directly accountable to municipal managers The Minister published Notice No. 287 in Government Gazette No. 40000 on 19 May 2016 (“Notice 278”), as a draft for consultation and comment from various parties. Written comments were solicited from the key stakeholders prescribed in Section 72A of the Systems Act per letter dated 14 May 2016. 8

Legislative context Written submissions were received from the following key stakeholders: Minister for Public Service and Administration (DPSA); Minister of Finance; MECs for local government; Organised local government; and Financial and Fiscal Commission (FFC). 9

Legislative context The request for comments was also extended to other parties of strategic importance: Institute of South African Municipal Accounting Officers (ISAMAO); Institute for Municipal Finance Officers (IMFO); and Institute of Local Government Management (iLGM). 10

Legislative context In order to maximise technical inputs, a two-day working session was held with all key stakeholders with the exception of the DPSA, which tendered an apology due to the fact that the working session coincided with the public service wage negotiations for the public service. The stakeholders were afforded an opportunity to make PowerPoint presentations. The main issues raised by the key stakeholders, inter alia, include the following: The final Notice should be gazetted on or before 31 March to allow municipalities to include remuneration of senior managers in their 2016/17 budgets; Concerns were raised with regard to the insertion of item 10 (i.e. salary progression) in the draft Notice through secondary legislation); 11

Legislative context Review of item 11 (i.e. payment of remote allowance) to allow provinces to add list of qualifying municipalities that have been excluded from the draft Notice; and Request to insert an item that obligates MECs to sign-off on information submitted to the Minister. 12

Legislative context The Minister published Notice No. 381 under Government Gazette No. 40118 on 1 July 2016 (“Notice 381”), after consultation with key stakeholders prescribed in Section 72A of the Systems Act. 13

Components of the Notice Preamble This item has been amended to highlight the purpose of the Notice which, inter alia, includes the need for ensuring that the upper limits constitutes an integral part of the human resource value chain in building resilient administrative institutions underpinned by the intent to enable municipalities to attract, employ and retain appropriately qualified and competent personnel necessary for effective performance of their functions. This item also strikes the balance between the need to prioritise service delivery to communities while ensuring sustained viable local government and the fiscal capacity of different categories of municipalities. 14

Components of the Notice Definitions Definitions of the following words have been inserted in the Notice to ensure consistent interpretation and application of the Notice across all municipalities: remote allowance; remoteness index; total population; and upper limits. 15

Components of the Notice Allocation of number of points for total municipal income, total salary and wage bill and total municipal equitable share Items 2, 3 and 4 of the Notice provide a formula for determining the categorisation of a municipality. This formula takes into consideration the following factors: total municipal income; total population; and total municipal equitable share. 16

Components of the Notice Allocation of number of points for total municipal income, total salary and wage bill and total municipal equitable share Factors determining the categorisation of municipalities are measured in terms of the principles of: reliability; fairness; objectiveness; credibility; consistency; and sustainability. 17

Components of the Notice The data used is easily accessible and verifiable from the municipal annual financial statements and data for population as gazetted by the Statistician-General. The following weights have been attached to the criteria for determining categorisation of municipalities: Factor Weighting Total municipal income 60% Total population 30% Total municipal equitable share 10% 18

Components of the Notice Determination of categorisation of municipality Item 5 of Notice 381 determines the municipal size using three factors namely: total municipal income, total population and total municipal equitable share. Using this formula, the sum of the number of points allocated to a municipality are added together resulting in the categorisation of municipalities. The municipal categorisation groups municipalities into 10 categories where 1 is the lowest municipality and 10 is the highest municipality. 19

Components of the Notice Determination of categorisation of municipality After identifying the number of points that a municipality will obtain for each of the criteria referred to above, the points are added together, whereafter the total deriving from this will inform the actual categorisation of the municipality. The total number of points allocated to a municipality, in terms of items 2, 3, and 4 respectively, determines the categorisation of such municipality, in accordance with the following table: 20

Components of the Notice CATEGORISATION OF MUNICIPALITY Categorisation From To 1 26 2 27 47 3 48 60 4 61 70 5 71 78 6 79 85 21

Components of the Notice CATEGORISATION OF MUNICIPALITY Categorisation From To 7 86 91 8 92 96 9 97 98 10 99 100 22

Components of the Notice EXAMPLE: The number of points allocated for the total municipal income of a municipality, is summarised as follows: TOTAL MUNICIPAL INCOME NUMBER OF POINTS Less that R 12,254,381 1 More than R 7,754,650,807 60 23

Components of the Notice EXAMPLE: The number of points allocated for the total population of a municipality, is summarised as follows: TOTAL POPULATION NUMBER OF POINTS Less than 60,775 1 More than 3,500,001 30 24

Components of the Notice EXAMPLE: The number of points allocated for the total municipal equitable share of a municipality, is summarised as follows: TOTAL MUNICIPAL EQUITABLE SHARE NUMBER OF POINTS Less than R 19,869,259 1 More than R 1,708,547,133 10 25

Components of the Notice Based on these points, the categorisation of a municipality will be as follows: CATEGORISATION NUMBER OF POINTS CATEGORY Municipality 1 3 1 Municipality 2 100 10 26

Components of the Notice Change of categorisation of a municipality In anticipation of a possible increase in the salary bill of senior managers owing from the implementation of changes in the categorisation of municipalities, a new item 6 has been introduced in the Notice to curb a sudden increase in salaries. The Notice further provides that if the categorisation of a municipality as determined in accordance with item 5 of the Notice results in a categorisation higher than the categorisation applicable to that municipality for the period immediately preceding the effective date of this Notice, the municipality may subject to the recommendation of the MEC for local government in a province and approval by the Minister, implement such new categorisation. 27

Components of the Notice Annual total remuneration packages of municipal managers MUNICIPAL CATEGORIES TOTAL REMUNERATION PACKAGE MINIMUM TOTAL REMUNERATION PACKAGE MIDPOINT TOTAL REMUNERATION PACKAGE MAXIMUM 10 R 2,301,368 R 2,913,125 R 3,524,881 9 R 1,974,999 R 2,468,750 R 2,962,500 8 R 1,705,111 R 2,092,161 R 2,479,211 7 R 1,475,241 R 1,788,171 R 2,101,101 6 R 1,276,174 R 1,528,351 R 1,780,530 28

Components of the Notice Annual total remuneration packages of municipal managers MUNICIPAL CATEGORIES TOTAL REMUNERATION PACKAGE MINIMUM TOTAL REMUNERATION PACKAGE MIDPOINT TOTAL REMUNERATION PACKAGE MAXIMUM 5 R 1,113,325 R 1,317,545 R 1,521,765 4 R 1,011,686 R 1,176,380 R 1,341,073 3 R 930,409 R 1,069,436 R 1,208,463 2 R 885,394 R 994,824 R 1,104,255 1 R 852,706 R 947,451 R 1,042,196 29

Components of the Notice Annual total remuneration packages of managers directly accountable to municipal managers MUNICIPAL CATEGORIES TOTAL REMUNERATION PACKAGE MINIMUM TOTAL REMUNERATION PACKAGE MIDPOINT TOTAL REMUNERATION PACKAGE MAXIMUM 10 R 1,841,095 R 2,330,500 R 2,819,905 9 R 1,580,000 R 1,974,999 R 2,370,000 8 R 1,364,089 R 1,673,728 R 1,983,368 7 R 1,180,193 R 1,430,538 R 1,680,881 6 R 1,035,906 R 1,233,222 30

Components of the Notice Annual total remuneration packages of managers directly accountable to municipal managers MUNICIPAL CATEGORIES TOTAL REMUNERATION PACKAGE MINIMUM TOTAL REMUNERATION PACKAGE MIDPOINT TOTAL REMUNERATION PACKAGE MAXIMUM 5 R 919,508 R 1,081,773 R 1,244,039 4 R 835,477 R 965,869 R 1,096,262 3 R 768,305 R 878,063 R 987,820 2 R 726,954 R 816,803 R 906,651 1 R 700,116 R 777,908 R 855,698 31

Components of the Notice Offer of remuneration on appointment Item 9 of the Notice provides guidelines with regard to the offer of remuneration on appointment. The offer of remuneration on appointment (i.e. minimum, mid and maximum salary range) is commensurate with the skills, expertise, competencies and qualifications that the senior manager displays/ possesses on appointment. 32

Components of the Notice Remote allowance Item 10 of the Notice introduces a remote allowance. This allowance replaces the rural allowance provided for in the 2015/16 Notice. One of the challenges faced by municipalities is to ensure that persons with the right skills are attracted and retained in all municipalities. Many municipalities are located in remote areas and therefore have difficulties in attracting and retaining suitably qualified and competent senior managers. 33

Components of the Notice Remote allowance A remoteness index covering all municipalities in the Republic was developed with the assistance of CSIR. It calculates the remoteness of municipalities from all municipal seats in the country to higher order service centres (i.e. the latter being regional service centres and metropolitans). 34

Components of the Notice Information to be submitted to the Minister In terms of item 11 of the Notice read in conjunction with section 107 of the Systems Act, every municipality must not later than 30 September 2016, submit a report containing the following information: Total approved posts; Total filed posts; Total vacant posts; Name of incumbent; Designation; 35

Components of the Notice Gender; Nature of contract (i.e. permanent or fixed term contract); Date of expiry of contract; Total remuneration packages; and Any allowance(s) payable to a senior manager; 36

Components of the Notice Transitional provisions The Notice does not affect the validity of an existing employment contract of a senior manager appointed before 1 July 2014. A municipality may, in exceptional circumstances and with the recommendation of the MEC for local government in the province, apply in writing to the Minister to waive any of the prescribed requirements as set out in this Notice. 37

Contract period of senior managers Statistics on contract period of municipal managers Province Contract expiring 2016 Contract expiring 2017 Contract expiring 2018 or more Vacant Eastern Cape 8  25 5  Free State 1 19 Gauteng 7 5 KwaZulu-Natal 9 35 3 14 Limpopo 20 Mpumalanga 16 4 38

Contract period of senior managers Statistics on contract period of municipal managers Province Contract expiring 2016 Contract expiring 2017 Contract expiring 2018 and 2019 Vacant Northern Cape 1 21 4 6 North West 13 2 3 Western Cape 7 10 5 Totals 35 164 47 39

Contract period of senior managers Statistics on contract period of managers directly accountable to municipal managers Province Contract expiring 2016 Contract expiring 2017 Contract expiring 2018 Contract expiring 2019 Contract expiring 2020 and beyond Permanent Vacant Eastern Cape 13 52 55 27 7   45 Free State 2 40 8 7 5 24 Gauteng 15 45 21 1 12 KwaZulu-Natal 26 81 20 16 36 60 Limpopo 9 34 29 17 43 Mpumalanga 3 39 30 40

Contract period of senior managers Statistics on contract period of managers directly accountable to municipal managers Province Contract expiring 2016 Contract expiring 2017 Contract expiring 2018 Contract expiring 2019 Contract expiring 2020 and beyond Permanent Vacant Northern Cape 5 6 16 8 1 47 35 North West 4 46 32 2  0 31 Western Cape 30 19 14 13 Totals 81 373 250 112 63 107 271 41

THANK YOU!!! 42