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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

142. Criteria for financial recovery plans


(1) A financial recovery plan must be aimed at securing the municipality’s ability to meets its obligations to provide basic services or its financial commitments, and such a plan, whether for a mandatory or discretionary intervention—
(a) must—
(i) identify the financial problems of the municipality;
(ii) be designed to place the municipality in a sound and sustainable financial condition as soon as possible;
(iii) state the principal strategic objectives of the plan, and ways and means for achieving those objectives;
(iv) set out a specific strategy for addressing the municipality’s financial problems, including a strategy for reducing unnecessary expenditure and increasing the collection of revenue, as may be necessary;
(v) identify the human and financial resources needed to assist in resolving financial problems, and where those resources are proposed to come from;
(vi) describe the anticipated time frame for financial recovery, and milestones to be achieved; and
(vii) identify what actions are necessary for the implementation of the plan, distinguishing between actions to be taken by the municipality and actions to be taken by other parties; and
(b) may—
(i) provide for the liquidation of specific assets, excluding those needed for the provision of the minimum level of basic municipal services;
(ii) provide for debt restructuring or debt relief in accordance with Part 3 of this Chapter;
(iii) provide for special measures to prevent unauthorised, irregular and fruitless and wasteful expenditures and other losses; and
(iv) identify any actual and potential revenue sources.


(2) In addition, a financial recovery plan—
(a) for a mandatory intervention must—
(i) set spending limits and revenue targets;
(ii) provide budget parameters which bind the municipality for a specified period or until stated conditions have been met; and
(iii) identify specific revenue-raising measures that are necessary forfinancial recovery, including the rate at which any municipal tax and tariffs must be set to achieve financial recovery; and
(b) for a discretionary intervention may suggest for adoption by the municipality—
(i) spending limits and revenue targets;
(ii) budget parameters for a specified period or until stated conditions have been met; and
(iii) specific revenue-raising measures that are necessary for financial recovery.