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Local Government: Municipal Finance Management Act, 2003 (Act No. 56 of 2003)

Chapter 13 : Resolution of Financial Problems

Part 2 : Provincial interventions

140. Criteria for determining serious or persistent material breach of financial commitments

 

(1) When determining whether the conditions for a mandatory intervention referred to in section 139 are met, all relevant facts must be considered.

 

(2) The following factors, singly or in combination, may indicate that a municipality is in serious material breach of its obligations to meet its financial commitments:
(a) The municipality has failed to make any payment to a lender or investor as and when due;
(b) the municipality has failed to meet a contractual obligation which provides security in terms of section 48;
(c) the municipality has failed to make any other payment as and when due, which individually or in the aggregate is more than an amount as may be prescribed or, if none is prescribed, more than two per cent of the municipality's budgeted operating expenditure; or
(d) the municipality's failure to meet its financial commitments has impacted, or is likely to impact on the availability or price of credit to other municipalities.

 

(3) Any recurring or continuous failure by a municipality to meet its financial commitments which substantially impairs the municipality's ability to procure goods, services or credit on usual commercial terms, may indicate that the municipality is in persistent material breach of its obligations to meet its financial commitments.

 

(4) Subsections (2) and (3) do not apply to—
(a) disputed obligations as to which there are pending legal actions between the municipality and the creditor, provided that such actions are not instituted to avoid an intervention; or
(b) obligations explicitly waived by the creditor.