Proposed Amendments To The Municipal PPP Regulations In A Bid To Strengthen Procurement Systems

• Published date: 18 March 2024
• Subject Matter: Government, Public Sector, Government Contracts, Procurement & PPP
• Law Firm: ENS
• Author: Ms Pippa Reyburn, Yana van Leeve, Deepna Desai and Alexandra Maree

The Minister of Finance has introduced the Municipal Public-Private Partnership Regulations of 2005 ("PPP Regulations"). The PPP Regulations are issued in terms of the Local Government: Municipal Finance Management Act, 2003 ("MFMA"), and give further effect to section 120 of the MFMA which introduces and regulates municipal PPPs. The proposed amendments aim to enhance the quality of PPP planning, as well as transparency and efficiency in the procurement of municipal PPPs. These amendments, open for public comment until 20 March 2024, signify a step towards streamlining the PPP procurement process and ensuring effective governance in relation to such projects.

Expansion of feasibility studies

Regulation 3 requires municipalities to conduct feasibility studies for potential PPPs. Specifically, it mandates an assessment of the municipality's needs, including an exploration of the various options available to satisfy those needs, and an analysis of the advantages and disadvantages of each option.

The proposed amendment expands the original regulation by requiring that the needs analysis component of the feasibility study must include an assessment of the direct and indirect costs and benefits associated with the project, including the expected effect of any service delivery mechanism on the environment and human health, well-being, and safety.

Enhancing municipal accountability

Regulation 4, which governs PPP procurement, clarifies that the award of a PPP agreement is subject to completion of the municipal approval process provided for in section 120(6) of the MFMA, in particular: the completion of the PPP feasibility study, a public participation process and comments from National and the relevant provincial treasury and other relevant departments.

The proposed amendments to Regulation 4 also:

• mandates that municipalities must proceed with the procurement of a PPP project, once the municipal approval has been obtained in terms of section 120(6) of the MFMA;
• requires municipalities to adhere to procurement timelines rigorously; failing which they must inform the National Treasury of delays, along with reasons and details of the steps taken to mitigate the delay;
• stipulates that municipalities may only cancel or suspend a PPP procurement process after consulting the National Treasury and submitting a detailed...