Acts Online
GT Shield

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

Chapter 6 : Debt

45. Short-term debt


(1) A municipality may incur short-term debt only in accordance with and subject to the provisions of this Act and only when necessary to bridge—
(a) shortfalls within a financial year during which the debt is incurred, in expectation of specific and realistic anticipated income to be received within that financial year; or
(b) capital needs within a financial year, to be repaid from specific funds to be received from enforceable allocations or long-term debt commitments.


(2) A municipality may incur short-term debt only if—
(a) a resolution of the municipal council, signed by the mayor, has approved the debt agreement; and
(b) the accounting officer has signed the agreement or other document which creates or acknowledges the debt.


(3) For the purpose of subsection (2)(a), a municipal council may—
(a) approve a short-term debt transaction individually; or
(b) approve an agreement with a lender for a short-term credit facility to be accessed as and when required, including a line of credit or bank overdraft facility, provided that—
(i) the credit limit must be specified in the resolution of the council;
(ii) the terms of the agreement, including the credit limit, may be changed only by a resolution of the council; and
(iii) if the council approves a credit facility that is limited to emergency use, the accounting officer must notify the council in writing as soon as practical of the amount, duration and cost of any debt incurred in terms of such a credit facility, as well as options for repaying such debt.


(4) A municipality—
(a) must pay off short-term debt within the financial year; and
(b) may not renew or refinance short-term debt, whether its own debt or that of any other entity, where such renewal or refinancing will have the effect of extending the short-term debt into a new financial year.


(a) No lender may wilfully extend credit to a municipality for the purpose of renewing or refinancing short-term debt that must be paid off in terms of subsection (4)(a).
(b) If a lender wilfully extends credit to a municipality in contravention of paragraph (a), the municipality is not bound to repay the loan or interest on the loan.


(6) Subsection (5)(b) does not apply if the lender—
(a) relied in good faith on written representations of the municipality as to the purpose of the borrowing; and
(b) did not know and had no reason to believe that the borrowing was for the purpose of renewing or refinancing short-term debt.