Kwadukuza IDP 2011 - KZN Development Planning

8.15 Investment PoliciesEvery municipal council and its body is in terms ofSection 13(2) of the Municipal Finance Management Act(MFMA) no 56 of 2003 is required to draft the Municipal’sinvestment regulations.The primary objective of the investment policy is to gainthe highest possible return, without unnecessary risk,during periods when excess funds are not being used.For this to be achieved, it is essential to have an effectivecash flow management program. Before any monies canbe invested, the Chief Financial Officer or his/her delegatemust determine whether there will be surplus fundsavailable during the term of the investment. The term ofthe investment should be fixed and in order to do this it isessential for the cash flow estimates to be drawn up.Investment shall be made with care, skill, prudence anddiligence. Investment officials are required to adhere towritten procedures and policy guidelines, exercise duediligence and exercise strict compliance with all legislation.KwaDukuza Municipality will not invest more than 30% ofavailable funds with a single institution.The Minister of finance may identify by regulation in termsof Section 168 of the MFMA instruments or investmentsother than those referred to below in which the Municipalitymay invest:• Deposit with banks registered in terms of the BanksAct, 1990 (Act No.94 of 1990);• Securities issued by the National Government;• Investments with the Public Investment Commissionersas contemplated by the Public Deposits Act, 1984(Act No. 46 of 1984);• A Municipality’s own stock or similar type of debt;• Internal funds of a Municipality which have beenestablished in terms of a law to pool money availableto the Municipality and to employ such money for thegranting of loans or advances to departments withina Municipality, to finance capital expenditure.• Bankers, acceptance certificates or negotiablecertificates of deposits of banks;• Long term securities offered by insurance companiesin order to meet the redemption fund requirements ofMunicipalities; and• Any other instrument or investments in which aMunicipality was under a law permitted to investbefore the commencement of the Local GovernmentTransition Act, 1996: Provided that such instrumentsshall not extend beyond the date of maturity orredemption thereof.8.16 Borrowing Framework Policy &GuidelinesThe objective of the policy is to maintain interest rate andcredit risk exposure to maintain debt within specified limitsand ensure adequate for the repayment of debt and toensure compliance with all Legislation and council policygoverning borrowings of funds. The primary goal in theborrowing of funds is obtained at the lowest possibleinterest rates at minimum risk, within the parameters ofauthorized borrowings.The scope of the policy includes:a) Risk – The need to manage interest rate risk,credit control credit risk exposure and tomaintain debt within specified limits.b) Cost of Borrowings - should be structured toobtain the lowest possible interest rate, on themost advantageous terms and conditions.c) Prudence - Borrowings shall be made with care,skill, prudence and diligence.d) Ownership - All loans must be in the name ofKwaDukuza Municipality.The relevant Legislation and regulations in terms of whichborrowing decisions are governed is Local GovernmentMunicipal Finance Management Act, No 56 of 2003.Type of loans included in the policy is “vanilla” loans,structured finance loans and bonds. KwaDukuza has notissued any bonds. KwaDukuza Municipality’s externalborrowings have been mainly sourced from the followingInstitutions:• South African Registered Banks• Development Bank of Southern Africa Limited• Infrastructure Finance Corporation LimitedKwaDukuza Municipality may incur long term debt onlyfor the purpose of Capital expenditure on infrastructure,property, plant or equipment to be used for the purposeof achieving the objects of Local Government as set outin Section 152 of the Constitution. The Municipal FinanceManagement Act provides that the Municipality mayprovide security for any of its debt obligations, including thegiving of a lien, pledging, mortgaging or ceding an asset,or giving any other form of collateral. The Municipalityhas a bank overdraft facility. However, due to its soundfinancial position, this facility is not utilized.Section 46 of the Municipal Finance Management Actstipulates that the Municipality may incur long-term debtonly if a resolution of the Council, signed by the Mayor,has approved the debt agreement and the AccountingOfficer has signed the agreement or other document whichacknowledges the debt.104KwaDukuza Municipality Integrated Development Plan - 2011/16