2. FINANCIAL & FISCAL COMMISSION RESEARCH CHAIR IN MULTI GOVERNMENT
MUNICIPAL VIABILITY QOLLOQUIUM
29 MAY 2015
FINANCIAL & FISCAL COMMISSION
RESEARCH CHAIR IN MULTI GOVERNMENT
FFC MIDRAND

3. THE MUNICIPAL DEMARCATION BOARD
Mandate
Local Government Municipal Demarcation Act, 1998 (Act No. 27 of 1998)
In terms of section 4 of the act as amended, The Board functions to determine municipal boundaries;
And provides advice on matters included in and pertaining to the act itself.

4. THE MUNICIPAL DEMARCATION BOARD DIRECTIVE SECTIONS
Local Government: Municipal Demarcation Act, 1998 (Act No. 27 of 1998)
SECTION
Section 21
Section 22
Section 23
Section 24
Section 25
Section 26
Section 27
Section 28
Section 29
Section 30
Section 21 Guidelines
Section 22 Notices
Section 23 Notices
Section 24 Criteria
Section 25 Factors
Section 26 Public Notices
Section 27 Ex-Post Written Representations
Section 28 Notices
Section 29 Formal Investigations
Section 30 Power To Summons
PURPOSE
Determining Municipal Boundaries
Specific Requests For Determinations or Re-Determinations
Ex-Post Section 21 and 22 Notices
Criteria to Determine Municipal Boundaries
Factors To Be Taken Into Account When Determining Municipal Boundaries
Public Notification To Stakeholders
Ex-Post Expiration Dates For Written Representations
Ad-Hoc Public Meetings
Conducting Formal Investigations to Make Recommendation s to The Board
To Give Testimony/ Evidence To The Board/ Investigations Committee
BRIEF DESCRIPTION
Process for determining municipal boundaries.
Determining municipal boundaries on its own initiative, on request of the Minister or MEC or municipality.
Informing the IEC of the Board’s decision on determining municipal boundaries.
States the criteria to be used when determining municipal boundaries.
States the factors to be taken into account when determining municipal boundaries.
Publish notifications in newspapers and broadcast contents of notice on the radio. All other media is optional.
After cut-off date of date for written views and representations, Board decides to have public meetings, or formal investigations, or both after considering representation and views received.
Requirements for conducting public meetings
Requirements for formal investigations
Powers of the investigating committee
Slide Prepared by Andile Mhlongo

5. THE MUNICIPAL DEMARCATION BOARD
Pesonalia
It’s not just about boundary demarcation; it’s about what we do for the people.
We are all touched by The Board, one way or another.
Source: Bulelwa Mbali-Khoele

6. FINANCIAL VIABILITY THE MFMA & LIQUIDITY
Capable of Success; Continuous Effectiveness; Capable of Normal Growth
FINANCIAL VIABILITY
Ability of entity to continue to achieve its operating objectives and fulfil its mission over the long term.
The ability of an organization to pay its bills, to secure reliable and diverse sources of funding.

7. FINANCIAL VIABILITY
Financial Viability
Economic Viability
Site by Site Viability: Property Assessments
Civic Viability
Short Term Economic
Viability
Long Term Economic
Derived From Viability Testing:
Other Types of Viability: OTV
OTV

8. FINANCIAL VIABILITY Financial Viability
In doing analysis, should a short term or long term perspective be considered?
Financial Viability is one of several “viability” components that shape the discussion on viability on the whole

9. THE MUNICIPAL FINANCE MANAGEMENT ACT
Financial Viability & Relevance of The Act
The MFMA should be used as a framework for determining financial viability – especially in the short term.
Relevant Chapters:
Chapter 3: Municipal Revenue – Banking, Investment and Asset Management
Chapter 4: Budgeting
Chapter 5: Co-operative Government
Chapter 6: Debt Management
Chapter 11: SCM
Capacity v. Capability

10. THE MFMA – BACK TO BASICS
Chapter 3: Municipal Revenue – Banking,
Investment and Asset Management
Chapter 4: Budgeting
Chapter 5: Co-operative Government
Chapter 6: Debt Management
Chapter 11: SCM
Back to Basics: Sound Financial Management
Revenue Collection: Functional Financial Management & Internal Controls
Cash Backed Budgets
National Government Programmes of
Support & Enforcement
Servicing Debt & Culture of Payment for Services
Efficient & Effective SCM Structures, Control Oversight

11. FINANCIAL VIABILITY THE MFMA & LIQUIDITY
Short Term Financial Viability
Focuses on Liquidity: Managing investments so that cash will be available when needed.
Implications for Local Government
Managing assets that can generate cash or be converted into cash.
Managing Cash flows: Its Equitable Share distributed
Debt management in terms of not exceeding cash inflows; in terms of using debt to augment revenues; use
of short term and long term debt – the bond market.
Should CFOs, municipalities be concerned with being liquid?
See: Financial Planning and Management in Public Organizations by Alan Walter Steiss and Chukwuemeka

12. COVERAGE & RATIOS TO MEASURE LIQUIDITY THE MDB DEMARCATION INDEX
Calculating the Demarcation Index (DI): A Short Term Analysis for Financial Viability
DI = W1 . (X1) + W2 . (X2) + W3 . (X3) (Wn) . (Xn)
Where: W = An applied weighting ranging from .01 to .99 for each (X) (1)
Where: X = The value of a calculated ratio, index or indicator (2)

13. COVERAGE & RATIOS TO MEASURE LIQUIDITY
Ten Ratios for Consideration
Per-capita Municipal Expenditure Ratio: Total population divided by the Average of total municipal expenditures over three years - (X1).
Coverage Ratio (1) for Municipal Expenditures: The average of total tax receipts over three years over (divided by) the average of total expenditures over three years - (X2).
Coverage Ratio (2) for Municipal Expenditures: The average of total revenue over three years over (divided by) the average of total expenditures over three years - (X3).
Year-to-year Assets Growth Ratio: Average of five years growth or decline in assets – i.e., calculate the percentage change in assets from year to year and calculate the average - (X4).
Year-to-year Liabilities Growth Ratio: Average of five years growth or decline in Liabilities – i.e., calculate the percentage change in liabilities from year to year and calculate the average - (X5).

14. COVERAGE & RATIOS TO MEASURE LIQUIDITY
Ten Ratios for Consideration:
Employment Rate: The average of three years, representing the percent of the population employed and individuals employed (need not be employed in the municipality) – e.g., migrant workers - (X6).
Small Size Business Indicator: Of the total number of all formally registered businesses, the percentage of those businesses having turnover less than 250,000 Rands - (X7).
Medium Size Business Indicator: Of the total number of all formally registered businesses, the percentage of those businesses having turnover of more than 250,000 Rands - (X8).
Efficiency Indicator (1) for Sewage and Waste Removal: The average percentage over five years, indicating the sewage and waste expenditure as a percentage of total expenditures - (X9).
Efficiency Indicator (2) for Sewage and Waste Removal: The average percentage over five years, indicating the year-to-year increase in sewage and waste expenditure - (X10).

15. CONCLUSION
Financial Viability is but one of several “viability” factors to be considered.
Financial Viability should be considered over the short term and the long term.
Short term viability may be concerned with liquidity.
The MFMA is concerned with the most critical aspects of municipal finance and therefore has relevance for
Financial Viability

16. THANK YOU