Local Government: Municipal Finance Management Act, 2003 (Act No. 56 of 2003) > Chapter 10 : Municipal Entities > Part 1 : Establishment > 84. Financial implications for municipalities

(1)	When considering the establishment of, or participation in, a municipal entity, a municipality must first—

(a)	determine precisely the function or service that such entity would perform on behalf of the municipality; and

(b)	make an assessment of the impact of the shifting of that function or service to the entity on the municipality’s staff, assets and liabilities, including an assessment of—

(i)	the number of staff of the municipality to be transferred to the entity;

(ii)	the number of staff of the municipality that would become redundant because of the shifting of that function or service;

(iii)

the cost to the municipality of any staff retrenchments or the retention of redundant staff;

(iv)	any assets of the municipality to be transferred to the entity;

(v)	any assets of the municipality that would become obsolete because of the shifting of that function or service;

(vi)	any liabilities of the municipality to be ceded to the entity; and

(vii)

any debt of the municipality attributed to that function or service which the municipality would retain.

(2)	A municipality may establish or participate in a municipal entity only if—

(a)	the municipal manager, at least 90 days before the meeting of the municipal council at which the proposed establishment of the entity, or the municipality’s proposed participation in the entity, is to be approved—

(i)	has, in accordance with section 21A of the Municipal Systems Act—

(aa)	made public an information statement setting out the municipality’s plans for the municipal entity together with the assessment which the municipality must conduct in terms of subsection (1); and

(bb)	invited the local community, organised labour and other interested persons to submit to the municipality comments or representations in respect of the matter; and

(ii)	has solicited the views and recommendations of—

(aa)	the National Treasury and the relevant provincial treasury;

(bb)	the national and provincial departments responsible for local government; and

(cc)	the MEC for local government in the province; and

(b)	the municipal council has taken into account—

(i)	the assessment referred to in subsection (1);

(ii)	any comments or representations on the matter received from the local community, organised labour and other interested persons;

(iii)

any written views and recommendations on the matter received from the National Treasury, the relevant provincial treasury, the national department responsible for local government or the MEC for local government in the province.

(3)	For the purposes of this section, "establish" includes the acquisition of an interest in a private company that would render that private company a municipal entity.