Ex abundanti cautela ‘from an excess of caution’ Climate Change Financing Workshop 12 December 2012 Jaap de Visser

Three themes mandates mandates legal impediments surrounding partnerships legal impediments surrounding partnerships opportunities for green procurement opportunities for green procurement

Mandates conundrum Schedules 4B and 5B of Constitution list City’s constitutional powers Three types of confusion 1. We can’t do it because somebody else can (e.g. electricity generation, housing) 2. The laws limit our power (e.g. building regulations and SWH by-law) 3. Nobody knows whether we may do it (e.g. waste to energy)

Mandates and unauthorised expenditure mandates discussion dominated by fear for unauthorised expenditure mandates discussion dominated by fear for unauthorised expenditurebut MFMA links unauthorised expenditure to the budget (not to mandates) MFMA links unauthorised expenditure to the budget (not to mandates) practice is different (e.g. grants-in-aid / municipal libraries are not ‘unauthorised expenditure’) practice is different (e.g. grants-in-aid / municipal libraries are not ‘unauthorised expenditure’)

 mandates discussion should revolve around lawful budget and not fear for unauthorised expenditure  mandates discussion should revolve around lawful budget and not fear for unauthorised expenditure

Interpretation of Schedule 4B / 5B competencies must be informed by: Interpretation of Schedule 4B / 5B competencies must be informed by:  Bill of Rights (municipality must help realise environmental rights – s 24)  Constitutional objects of local government (promote healthy environment) City may adopt its own definitions of 4B / 5B competencies in by-laws as long as they don’t contradict other laws City may adopt its own definitions of 4B / 5B competencies in by-laws as long as they don’t contradict other laws

Partnerships – overview of applicable legal frameworks Municipal Systems Act Provision of service by private company on behalf of municipality  ‘external service delivery mechanism’ Provision of service by private company on behalf of municipality  ‘external service delivery mechanism’ Systems Act defines “municipal service” Systems Act defines “municipal service” Systems Act defines external mechanism (i.e. private company or outside NGO) Systems Act defines external mechanism (i.e. private company or outside NGO)

Decision making procedure - Systems Act requirements 1. review how the service is currently provided 2. process for considering external mechanism (with full council approval) 3. feasibility study 4. competitive bidding

If the partnership amounts to Public- Private Partnership  further requirements in MFMA/PPP Regs If the partnership amounts to Public- Private Partnership  further requirements in MFMA/PPP Regs Regs define PPP, e.g.: Regs define PPP, e.g.:  applies only to contracts with private parties  not just municipal functions but any activity within competence of municipality

MFMA – PPP Regulations feasibility study feasibility study prescribed community and IGR consultation prescribed community and IGR consultation council approval council approval

S 33 MFMA: 3-year rule Contract that goes beyond 3 years: Contract that goes beyond 3 years:  further community / IGR consultation  consider specific criteria  council determines that municipality will secure financial / economic benefit

Partnership affects municipal assets? Disposal of assets? / granting of rights to use, control or manage assets? Disposal of assets? / granting of rights to use, control or manage assets?  Asset Transfer Regulations (consultation and IGR procedure)

Criticism overregulation – cumbersome and expensive, overlap overregulation – cumbersome and expensive, overlap bias towards internal mechanisms bias towards internal mechanisms NGOs-partnerships subject to competitive bidding NGOs-partnerships subject to competitive bidding 3-year rule particularly frustrating 3-year rule particularly frustrating  energy partnerships - return on investment takes time

Context for defensive interpretation Criminalisation of poor financial management Criminalisation of poor financial management Personal liability of city officials Personal liability of city officials Fear for political reprisals Fear for political reprisals Hype around ‘clean’ audit Hype around ‘clean’ audit

From defensive interpretation to progressive interpretation most requirements do not affect discretion – they’re procedural most requirements do not affect discretion – they’re procedural consider benefit of council decision  lowers risk of loosing court battles (PAJA may not apply) consider benefit of council decision  lowers risk of loosing court battles (PAJA may not apply)

don’t readily assume that all procedures are applicable don’t readily assume that all procedures are applicable  Diggers v City of Matlosana  ConCourt in  ConCourt in Giant Concerts CC v Rinaldo Investments importance of definitions of PPP, ‘external partnership’, transfer of asset etc. importance of definitions of PPP, ‘external partnership’, transfer of asset etc.

S 78 MSA: only if it’s a municipal service S 78 MSA: only if it’s a municipal service PPP Regs: only if it’s a private company PPP Regs: only if it’s a private company Asset Regs: only if asset is sold or rights to use/control/manage is transferred Asset Regs: only if asset is sold or rights to use/control/manage is transferred SCM always applicable to the sale of assets? SCM always applicable to the sale of assets?

SCM always applicable to sale? Giant Concerts CC v Rinaldo Investments (Pty) Ltd and Others [2012] ZACC 28 Sale of municipal land “by private bargain” to investor Complaint: s 217 (Procurement) applicable “Giant never gave substance to its complaint that the process should have involved competitive tendering by even minimally showing in the review proceedings that it had the capacity to make a competitive alternative proposal”. Space to respond to unique proposals?

Progressive interpretation of s 33 MFMA S 33(1)(c) – council must determine that a long-term contract brings: a) significant capital investment b) significant financial benefit; or c) significant financial economic benefit Significance of distinction between a) and b)

Green procurement Legal framework permits allocation of preference points for purposes related to climate change mitigation Legal framework permits allocation of preference points for purposes related to climate change mitigation Broaden effect of green procurement by using environmental standards/certification Broaden effect of green procurement by using environmental standards/certification Green procurement may ameliorate restrictive effect of SCM Green procurement may ameliorate restrictive effect of SCM

In sum re-orientation around City mandates away from singular focus on unauthorised expenditure towards properly planned/budgeted projects re-orientation around City mandates away from singular focus on unauthorised expenditure towards properly planned/budgeted projects combination of (1) lobby against overregulation and (2) progressive interpretation combination of (1) lobby against overregulation and (2) progressive interpretation

Thank You