National Treasury has warned the troubled Madibeng municipality in North West that it may have to withhold funds if the council fails to address its escalating unauthorised, irregular, fruitless and wasteful (UIF&W) expenditure.
This is contained in a letter that the Sunday Times has seen which was signed by the chief director, Jan Hattingh, and dated October 3.
The letter accused the Madibeng municipality of breaching section 18 of the Municipal Finance Management Act (MFMA) by approving a budget it cannot fund, which led to cash flow issues and delayed payments to service providers.
In the letter, Hattingh stated: “The municipality must submit a credible budget funding plan within 14 days or face action under section 216(2) of the constitution.”
Hattingh added that failure to comply will be regarded as a deliberate contravention, and the Treasury has the right to lay charges of financial misconduct.
According to the Treasury, the Madibeng municipality has continued to approve the unfunded budgets while risking state-owned enterprises that are dependent on municipal payments.
Our challenges are not resolvable over a year but over time, and we realise that we cannot continue to submit an unfunded budget,” he added.
— Quiet Kgatla, Madibeng municipal manager
During a council meeting on October 13, the council tabled a new UIF&W expenditure reduction strategy and implementation plan report that was signed by municipal manager Quiet Kgatla.
The report revealed mismanagement of funds that includes R4.6bn in unauthorised expenditure, R3.7bn in irregular expenditure and R316m in fruitless and wasteful spending.
Kgatla told the Sunday Times that the total R8.7bn accumulated between the 2015/16 and 2023/24 financial years was a result of overspending on the approved budget.
“The overspending is mostly a result of cash and non-cash items like depreciation and write-offs, payment of creditors after 20 days, where service providers would charge the municipality interest on late payment,” Kgatla said.
Kgatla said the accounting officer has finalised all internal investigations on which funds must be recovered and which need to be written off, with no disciplinary action against the officials who are implicated.
“The accounting officer has done his investigations with clear recommendations. The reports are now with the council for processing,” Kgatla said.
The municipality has committed to achieve a 100% reduction in UIF&W expenditure by August 2026, but Kgatla said the deadline has been revised to June 30 2026.
“Our challenges are not resolvable over a year but over time, and we realise that we cannot continue to submit an unfunded budget,” he added.
The Treasury warned that failure to implement the plan could lead to charges of financial misconduct and advised the municipality to work with the North West provincial treasury to ensure compliance.
Sydney Monnakgotla from Save South Africa argued that the municipality would not be able to accomplish a 100% reduction in UIF&W expenditure as planned.
“There is no revenue collection in Madibeng as people do not want to put systems in place; the system is broken,” Monnakgotla said.
Monnakgotla added the municipality has to correct their management of revenue collection and municipal financial budgets.
The Sunday Times approached the mayoral office for additional comment from Douglas Maimane, but the mayor’s spokesperson, Tumelo Tshabalala, said the municipality “will not entertain another enquiry about the same subject, and we will not have two of our principals responding to one publication about the same matter”.
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