Investment opportunities in municipalities

By: Helen Venter

Will the Facilitation Standard Operating Procedure cut red tape for municipal investment opportunities?

The Red-Tape Reduction team in the Western Cape Department of Economic Development and Tourism, identified that one of the most frustrating experiences for businesses who would like to invest in municipal opportunities, is the red-tape linked to these investments.

To address the challenge, the Red-Tape Reduction team developed an Investment Facilitation Standard Operating Procedure (IFSOP), to manage investment opportunities. The Theewaterskloof Municipality in the Overberg, was identified as the pilot site for the project.

The main purpose of the IFSOP is to create uniform investment promotion, facilitation processes and procedures in the municipality to attract new investors, and retain existing ones. At the same time satisfying the legal and legislative objectives, as well as the governance objectives of economy, efficiency and fairness.

IFSOP Objectives

The main objectives of the IFSOP are to:

  • Provide clarity about the relevant legal and legislative framework, in relation to investment opportunities

  • Assist in the streamlined management and finalising of investment applications

  • Enable the correct identification and classification of investment opportunities

  • Provide a SCM system and process that will ensure clarity and consistency

  • Provide an investment opportunity recording process, that will ensure transparency

  • Provide further guidelines and procedures (the 'how')

  • Make officials aware of the treatment and/or management of investment opportunities

  • Instil best practice

  • Strengthen the control environment

  • Establish a single point of access for the management of investment opportunities

  • Assist management to appropriately act on investment opportunities

  • To strengthen the ability to manage investment opportunities

  • To create a central capacity to manage investment opportunities

The IFSOP process

The IFSOP process will commence with an application - either from an external private person or from the municipality executing the investment strategy. The application will be lodged with the investment administrator, who will forward it to the investment unit.

Thereafter a consultation process ensues, following which the application will be forwarded to the council - or responsible functionary - who will make the final resolution. The approved investment proposal will be administered by the investment administrator, and managed by the designated municipal contract manager. In the event of a person being aggrieved by the final resolution, a formal appeal may be lodged with the investment appeal authority.

Graphically, the IFSOP governance process can be depicted as:

investment governance.jpg

Figure 1. The IFSOP governance process

The main IFSOP processes can graphically be depicted as:


Figure 2. The main IFSOP processes

IFSOP investment facilitation policy

Prior to adopting the IFSOP, it is necessary for the relevant municipal council to adopt the following investment facilitation policy statements:

  1. Investment opportunities will be guided by one set of policy statements incorporated in the municipal IDP - supported by an Investment Facilitation SOP (IFSOP) - which provides guidelines for the following IFSOP primary processes:

  1. Investment strategic planning

  2. Implementation of investment strategy

  3. Application for investment opportunities

  4. Approval of investment applications

  5. Supply chain management (SCM) processes relevant to investment opportunities

  6. Contract management of approved investment applications

  7. Accounting and asset management of approved investment applications

  8. Enforcement, monitoring and reporting of approved investment applications or opportunities

  1. The policy statements and IFSOP will apply to all municipal officials - as well as private persons - wishing to submit an investment application to the municipal area, for projects:
      1. Exceeding the value of R10 m, or

      2. Exceeding the period of 3 years, or

      3. Complex developments requiring cross cutting municipal operations.

C. The establishment of a Municipal Development Fund (MDF), which will comprise a ring-fenced municipal account, as per section 12 of the MFMA, and will be financed from:

    1. Development charges

    2. Investment donations

    3. Sponsorships

    4. Grant funding

    5. Municipal funding

  1. Investment incentives will be considered for each investment proposal.

E. A SCM Chapter must be developed to align SCM activities with investment opportunities - from both an acquisition and disposal perspective - providing for mechanisms such

  1. Competitive bidding

  2. MSA s78 process

  3. Direct negotiation

  4. Unsolicited bid

  5. Public private partnerships

  6. Auctions

  7. Long term acquisitions

  8. Expropriation

  9. Donations

  10. Exchange

  11. Leasing-out

  12. Demolition

  13. Decommissioning

  14. Transfers

F. The following governance structures will institutionalise investment facilitation in the municipality:

      • An identified and appointed investment administrator (existing position)

      • Investment unit, currently being called the development support team

      • Appeal authority, consisting of the MAYCO

The documentation and further information can be solicited from

Mr Raybin Windvogel

Director: Red Tape Reduction Unit

(021) 483 - 9902


Michelle Ellis

Deputy Director: Red Tape Reduction Unit

(021) 483 - 9107

Written by:


Helen Venter | Managing Director

Small seeds to promote sustainable governance growth

T: 021 863 1532 | M: 082 440 1886