A municipality may provide a municipal service in its area or a part of its area through-

1. an internal mechanism, which may be-
   
   1. a department or other administrative unit within its administration;
   2. any business unit devised by the municipality. provided it operates within the municipality's administration and under the control of the council in accordance with operational and performance criteria determined by the council; or
   3. any other component of its administration; or
2. an external mechanism by entering into a service delivery agreement with-
   
   1. a municipal entity;
   2. another municipality;
   3. an organ of state, including:
      

      aa)	a water committee established in terms of the Water Services Act, 1997 (Act No. 108 of 1997);
      bb)	a licensed service provider registered or recognised in terms of national legislation; and
      cc)	a traditional authority;

   4. a community based organisation or other non-governmental organisation legally competent to enter into such an agreement; or
   5. any other institution, entity or person legally competent to operate a business activity.

A municipality must review and decide on the appropriate mechanism to provide a municipal service when-

1. preparing or reviewing its integrated development plan;
2. a new municipal service is to be provided;
3. an existing municipal service is to be significantly upgraded, extended or improved;
4. a performance evaluation in terms of Chapter 6 requires a review of the delivery mechanism;
5. the municipality is restructured or reorganised in terms of the Municipal Structures Act;
6. requested by the local community through mechanisms, processes and procedures established in terms of Chapter 4; or
7. instructed to do so by the provincial executive acting in terms of section 139(1)(a) of the Constitution.

1. When a municipality has in terms of section 77 to decide on a mechanism to provide a municipal service in the municipality or a part of the municipality, or to review any existing mechanism-
   
   1. it must first assess-
      
      1. the direct and indirect costs and benefits associated with the project if the service is provided by the municipality through an internal mechanism, including the expected effect on the environment and on human health, well-being and safety;
      2. the municipality's capacity and potential future capacity to furnish the skills. expertise and resources necessary for the provision of the service through an internal mechanism mentioned in section 76(a);
      3. the extent to which the re-organisation of its administration and the development of the human resource capacity within that administration, as provided for in sections 51 and 68, respectively, could be utilised to provide a service through an internal mechanism mentioned in section 76(a);
      4. the likely impact on development, job creation and employment patterns in the municipality; and
      5. the views of organised labour; and
   2. it may lake into account any developing trends in the sustainable provision of municipal services generally.
2. After having applied subsection (1), a municipality may-
   
   1. decide on an appropriate internal mechanism to provide the service; or
   2. before it takes a decision on an appropriate mechanism, explore the possibility of providing the service through an external mechanism mentioned in section 76(b).
3. If a municipality decides in terms of subsection (2)(b) to explore the possibility of providing the service through an external mechanism it must-
   
   1. give notice to the local community of its intention to explore the provision of the service through an external mechanism; and
   2. assess the different service delivery options in terms of section 76(b), taking into account-
      
      1. the direct and indirect costs and benefits associated with the project, including the expected effect of any service delivery mechanism on the environment and on human health, well-being and safety;
      2. the capacity and potential future capacity of prospective service providers to furnish the skills, expertise and resources necessary for the provision of the service;
      3. the views of the local community;
      4. the likely impact on development and employment patterns in the municipality; and
      5. the views of organised labour.
4. After having applied subsection (3), a municipality must decide on an appropriate internal or external mechanism, taking into account the requirements of section 73(2) in achieving the best outcome.
5. When applying this section a municipality must comply with-
   
   1. any applicable legislation relating to the appointment of a service provider other than the municipality; and
   2. any additional requirements that may be prescribed by regulation.

If a municipality decides to provide a municipal service through an internal mechanism mentioned in section 76(a), it must-

1. allocate sufficient human, financial and other resources necessary for the proper provision of the service; and
2. transform the provision of that service in accordance with the requirements of this Act.

1. If a municipality decides to provide a service through a service delivery agreement in terms of section 76(b) with-
   
   1. a municipal entity, another municipality or a national or provincial organ of state, it may negotiate and enter into such an agreement with the relevant municipal entity, municipality or organ of state without applying Part 3 of this Chapter; or
   2. any institution or entity. or any person, juristic or natural, not mentioned in paragraph (a), it must apply Part 3 of this Chapter before entering into such an agreement with any such institution, entity or person.
2. Before a municipality enters into a service delivery agreement for a basic municipal service it must establish a mechanism and programme for community consultation and information dissemination regarding the service delivery agreement. The contents of a service delivery agreement must be communicated to the local community through the media.

1. If a municipal service is provided through a service delivery agreement in terms of section 76(b), the municipality remains responsible for ensuring that that service is provided to the local community in terms of the provisions of this Act, and accordingly must-
   
   1. regulate the provision of the service, in accordance with section 41;
   2. monitor and assess the implementation of the agreement, including the performance of the service provider in accordance with section 41;
   3. perform its functions and exercise its powers in terms of Chapters 5 and 6 if the municipal service in question falls within a development priority or objective in terms of the municipality's integrated development plan;
   4. within a tariff policy determined by the municipal council in terms of section 74, control the setting and adjustment of tariffs by the service provider for the municipal service in question; and
   5. generally exercise its service authority so as to ensure uninterrupted delivery of the service in the best interest of the local community.
2. A municipality, through a service delivery agreement-
   
   1. may assign to a service provider responsibility for-
      
      1. developing and implementing detailed service delivery plans within the framework of the municipality's intergrated development plan;
      2. the operational planning, management and provision of the municipal service;
      3. undertaking social and economic development that is directly related to the provision of the service;
      4. customer management;
      5. managing its own accounting, financial management, budgeting. Investment and borrowing activities within a framework of transparency, accountability, reporting and financial control determined by the municipality, subject to applicable municipal finance management legislation;
      6. the collection of service fees for its own account from users of services in accordance with the municipal council’s tariff policy in accordance with the credit control measures established in terms of Chapter 9;
   2. may pass onto the service provider, through a transparent system that must be subject to performance monitoring and audit. funds for the subsidisation of services to the poor;
   3. may in accordance with applicable Iabour legislation. transferor second any of its staff members to the service provider, with the concurrence of the staff member concerned;
   4. must ensure continuity of the service if the service provider is placed under judicial management, becomes insolvent, is liquidated or is for any reason unable to continue performing its functions in terms of the service delivery agreement; and
   5. must, where applicable, take over the municipal service, including all assets, when the service delivery agreement expires or is terminated.
3. The municipal council has the right to set, review or adjust the tariffs within its tariff policy. The service delivery agreement may provide for the adjustment of tariffs by the service provider within the Iimitations set by the municipal council.
4. A service delivery agreement may be amended by agreement between the parties, except where an agreement has been concluded following a competitive bidding process, in which case an amendment can only be made after the local community has been given-
   
   1. reasonable notice of the intention to amend the agreement and the reasons for the proposed amendment; and
   2. sufficient opportunity to make representations to the municipality,
5. No councillor or staff member of a municipality may share in tiny profits or improperly receive any benefits from a service provider providing a municipal service in terms of a service delivery agreement.

1. If a municipality intends to provide a municipal service in the municipality through a service delivery agreement with a municipal entity, it may-
   
   1. alone or together with another municipality, establish in terms of applicable national or provincial legislation a company. co-operative, trust, fund or other corporate entity to provide that municipal service as a municipal entity under the ownership control of that municipality or those municipalities;
   2. alone or together with another municipality, acquire ownership control in any existing company, co-operative, trust, fund or other corporate entity which as its main business intends to provide that municipal service in terms of a service delivery agreement with the municipality; or
   3. establish in terms of subsection (2) a service utility to provide that municipal service.
2. 1. A municipality establishes a service utility in terms of subsection (1)(c) by passing a by-law establishing and regulating the functioning and control of the service utility;
   2. A service utility is a separate juristic person;
   3. The municipality which established the service utility must exercise ownership control over it in terms of its by-laws.