Key Takeaways
- Municipalities across South Africa incurred approximately R151 billion in unauthorised, irregular, fruitless and wasteful expenditure (UIFWE) according to the Auditor‑General.
- The National Treasury insists that Section 32 of the Municipal Finance Management Act (MFMA) provides the statutory liability framework for recovering these funds, but it must be read alongside labour, criminal and other municipal laws.
- Liability can attach to political office‑bearers, accounting officers and officials when their conduct is deliberate or negligent, and this liability exists in addition to any common‑law or statutory remedies.
- Moving beyond mere disclosure, municipalities are required to identify the specific individuals whose actions contributed to UIFWE before pursuing recovery.
- The Democratic Alliance (DA) in Johannesburg welcomed the updated MFMA circular, warning of an accountability crisis under the ANC‑led coalition and signalling readiness to pursue criminal cases under Section 173 of the MFMA for financial misconduct.
Introduction and Treasury’s Initiative
The National Treasury has signalled its intention to hold municipal officials accountable for the massive losses stemming from unauthorised, irregular, fruitless and wasteful expenditure (UIFWE). By targeting those directly responsible for the nearly R151 billion in questionable spending, Treasury aims to strengthen fiscal discipline and restore public trust in local government financial management. This move reflects a broader strategy to shift from passive reporting to active recovery and deterrence of fiscal misconduct across the country’s 257 municipalities.
Auditor‑General’s Findings
Auditor‑General Tsakani Maluleke’s recent reports quantify the problem, revealing that municipalities have incurred R137 billion in irregular expenditure, R8.5 billion in unauthorised expenditure, and R5.27 billion in fruitless and wasteful expenditure. Together these figures amount to roughly R151 billion of UIFWE, highlighting systemic weaknesses in budgeting, procurement and oversight that have persisted despite existing legislative frameworks.
Breakdown of Expenditure Categories
Irregular expenditure—spending that contravenes supply‑chain policies or other regulations—constitutes the largest share at R137 billion. Unauthorised expenditure, which refers to costs incurred without proper budgetary approval, totals R8.5 billion. Fruitless and wasteful expenditure, encompassing pointless or inefficient use of resources, adds another R5.27 billion. Each category points to distinct breakdowns in procedural compliance, yet all contribute to the overall fiscal leakage identified by the Auditor‑General.
Legal Basis: Section 32 of MFMA
Section 32 of the Municipal Finance Management Act establishes the core legal framework for dealing with UIFWE once it has been detected. Importantly, the Treasury clarifies that this section does not primarily regulate prevention; rather, it sets out the steps for addressing identified losses. The provision creates a statutory liability mechanism designed to ensure that municipalities do not automatically absorb losses caused by culpable individuals.
Statutory Liability Framework
Underpinning Section 32 is the principle that municipal resources must be protected and that financial losses should not be shouldered by the municipality when specific persons are responsible. The section introduces a statutory liability structure that operates alongside—rather than replaces—common‑law remedies and other statutes. This approach seeks to deter misconduct by making individuals financially answerable for the consequences of their actions.
Complementary Legislation
The Treasury stresses that Section 32 must be interpreted in conjunction with a broader accountability system, including labour law, criminal law, the Municipal Systems Act, the Municipal Supply Chain Management Regulations, and the Municipal Regulations on Financial Misconduct Procedures and Criminal Proceedings (Financial Misconduct Regulations). Reading the provision in isolation would miss the synergistic effect of these laws, which together define the procedural and substantive grounds for holding officials liable.
Who Can Be Held Liable
MFMA’s Section 32 identifies political office‑bearers, accounting officers, and municipal officials as potential responsible persons. Liability attaches when their conduct is shown to be deliberate or negligent in relation to the UIFWE. Importantly, the statutory liability exists in addition to any liability arising from common law or other statutes, meaning officials may face multiple layers of accountability for the same misconduct.
Beyond Disclosure: Need for Individual Accountability
A key shift emphasized by the Treasury is the requirement for municipalities to move beyond mere disclosure of UIFWE figures. Before any recovery can be pursued, authorities must determine whether a specific person’s conduct contributed to the expenditure. This investigative step ensures that financial responsibility is accurately assigned and prevents blanket penalties that could unfairly burden innocent parties or the municipality as a whole.
DA Johannesburg’s Response
The Democratic Alliance in Johannesburg welcomed the updated MFMA circular, viewing it as a tool for better management of irregular, fruitless and wasteful expenditure. The party highlighted that Johannesburg is currently facing an accountability crisis under the ANC‑led coalition, citing repeated failures to curb UIFWE. The DA asserted that it would not accept the status quo and would consider using all available legal mechanisms to enforce accountability.
Potential Criminal Prosecution – Section 173 MFMA
In line with its stance, the DA indicated readiness to initiate criminal proceedings against officials and politicians where warranted. It pointed to Section 173 of the MFMA, which deals with criminal liability relating to financial misconduct, as providing the legal basis for such actions. The section allows for prosecution when financial mismanagement constitutes a criminal offence, thereby adding a potent deterrent to the civil recovery mechanisms outlined in Section 32.
By combining statutory liability under Section 32, the complementary reach of other legislation, and the option of criminal sanctions via Section 173, the National Treasury aims to create a robust deterrent against fiscal mismanagement. Success will depend on municipalities’ willingness to conduct thorough investigations, identify culpable individuals, and pursue recovery—or prosecution—where the evidence supports it. The ultimate goal is to safeguard public funds and restore confidence in local governance across South Africa.