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  • A draft update to finance rules for municipalities will give metropolitan areas a big increase in the current limit for when competitive bids must be solicited.
  • To date, anything worth more than R200,000 – including spending on consultants – had to go out on tender.
  • Now national treasury is proposing different limits for local, district, and metro municipalities.
  • The effect would be that metros could spend up to R750,000 without soliciting quotations.
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South Africa's metropolitan municipalities will get a 275% increase in the amount of money they may spend without going out on tender, under a draft rule change formally presented by the national treasury on Friday.

Current municipal supply chain management regulations, imposed under the Municipal Finance Management Act, has a simple rule: anything worth R200,000 or more must go through competitive bidding. That includes any procurement for goods or services, as well as contracts with consultants.

The rules cap petty cash spending at R2,000, and require "written or verbal quotations" for anything between R2,000 and R10,000. For spending above that, "formal written price quotations" are required – until the R200,000 ceiling is reached, at which point competitive bidding is required.

The proposed new rules would keep the R2,000 cap on petty cash, and the R10,000 cap for verbal quotations. Beyond that, though, the limits would depend on the type of municipality. District municipalities would still have to go out on tender for anything over R200,000, while local municipalities would have that limit increased by 50%, to R300,000.

For the large metropolitan municipalities, though, the cap would be R750,000.

The new ceilings will also apply to consulting deals, as long as contracts are no longer than one year.

In July, auditor-general Kimi Makwetu reported that irregular expenditure at municipalities had climbed to more than R32 billion in the previous financial year, up from R24 billion the year before.

Several cases of misspending, or rule breaking in procurement, involved the use of consultants to prepare financial statements or to reconcile accounts. 

(Compiled by Phillip de Wet)

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