The High Court in Bloemfontein has ordered the Mafube Local Municipality, four municipal officers, and the administrator appointed to sort out the municipality’s finances more than R14 million, plus interest, to the Municipal Workers’ Retirement Fund (MWRF).
The court forwarded the judgment to the Director of Public Prosecutions (DPP) in the Free State for further investigation. The DPP was required to report to the court within 60 days on the progress of the investigation, highlighting potential criminal liability related to the respondents’ conduct.
The judgment marks the latest development in the ongoing disputes involving the municipality’s non-payment of employee contributions and its failure to comply with previous court orders dating as far back as 2011.
Read: Court orders employer to disclose bank records in battle over contributions
Judge Mareena Opperman – like the judges in the previous cases – rebuked the municipality for repeatedly challenging the fund’s applications aimed at securing its members’ pensions instead of paying over the contributions.
She noted that the municipality has been unsuccessful in every single case, and in each case, the court made an adverse cost order against the municipality.
Judge Opperman described the long-running litigation as a “conspicuous and disappointing example of the destruction of the sacrosanct constitutional ethos of the Republic of South Africa by the very institution and its officers that must protect it. The conduct of the municipality and the other respondents causes a malfunction of the rule of law. The consequences for the employees-members, that are innocent bystanders, are grave.”
According to data published by the FSCA, 149 of the country’s 257 municipalities (or 58%) are in arrears with their retirement contributions at the end of 2023. These unpaid contributions are estimated at R1.4 billion across 10 retirement funds. Sixty-nine percent (by value) of the municipal arrears are in the Free State, and only one of that province’s 23 municipalities does not owe contributions to retirement funds.
Key aspects of the judgment
The judgment, delivered on 17 January, unequivocally reaffirms the binding and stringent nature of section 13A of the Pension Funds Act (PFA), which requires that employers must pay contributions to a retirement fund in accordance with the fund’s rules.
Judge Opperman stated said this provision might seem “draconic and unfair” to some, but it emphasises that organs of state and specifically municipalities and their office bearers “must protect the constitutional ethos and democracy diligently”. This duty lies “at the core of their designation”.
A pivotal point of the judgment is its dismissal of any argument based on the timing of the respondents’ appointment or resignation. Judge Opperman stated: “The date of appointment and resignation is irrelevant to the liability.”
The respondents’ liability was established by their tenure at the time the claim was lodged. The claim, spanning May 2021 to January 2024, was treated as a singular, indivisible obligation. The court rejected the notion of apportioning liability across timeframes of individual officeholders, because doing so would lead to “total anarchy in the management of municipalities”.
Finally, the judgment clarified that the litigation, initiated on 25 March 2024, solidified the collective responsibility of the respondents for the entire debt. This assertion reinforces the principle of joint accountability for municipal financial obligations under the law.
Criticism of the municipality’s evasion of accountability
Judge Opperman sharply criticised the Mafube municipality’s conduct and its failure to meet its obligations under the PFA. Her judgment highlighted the systemic evasion of accountability, at the institutional and individual levels, and detailed the municipality’s failure to comply with its statutory duties to its employees and the MWRF.
“The municipality has become a faceless and untouchable perpetrator of the PFA to the detriment of the constitutional rights of the affected employees-members. It is common cause […] that the municipality has evaded accountability for many years and illegitimately so,” he said.
The Mafube municipality (first respondent) was placed under administration by the Free State provincial government in June 2022.
The second to fifth respondents – the municipal manager, chief financial officer (CFO), executive mayor, and Lead Provincial Exco representative (administrator) – were named as parties to determine their individual liability.
Judge Opperman also criticised the respondents for their “sloppy” conduct during the litigation. The municipality did not file an answering affidavit, leaving the case against it unopposed. The second to fifth respondents failed to file affidavits within the required 15-day period, only submitting them after multiple delays and just before the hearing. The respondents did not file condonation applications their non-compliance with the Uniform Rules of Court.
Constitutional obligation to pay contributions
The court emphasised that the obligation to pay retirement contributions under section 13A(1) of the PFA is a “sui generis constitutional obligation”. This obligation is more stringent than standard legal liabilities because of its constitutional underpinnings.
Judge Opperman dismissed the argument that section 13A(1) – by stating that contributions “are to be deducted” – imposes liability for future contributions only and not existing arrears. The judge warned that such an interpretation would have “bizarre consequences”, allowing current officials to escape liability for arrears, which would undermine the purpose of section 13A and related laws.
The fund’s right to pursue liable individuals
Section 13A(9)(a) of the PFA mandates that the fund must provide a written request to the employer to identify those personally liable for unpaid contributions. This is the sole preliminary step required to initiate claims under the PFA. The court noted that the fund complied with this obligation by sending a request to the municipality on 24 October 2019. However, the municipality failed to respond, ignoring this statutory requirement.
Judge Opperman said no further inquiry or process was required before filing the claim. The municipality’s inaction and silence in response to the request demonstrated non-compliance with the PFA, shifting the burden onto the employer and its officers.
This failure by the municipality underscores its disregard for the mandatory provisions of the PFA, paving the way for personal liability under section 13A(9)(b).
Section 13A(9)(b) unequivocally states that if the employer does not comply with its obligation to identify the liable individuals, all persons regularly involved in the management of the employer’s financial affairs become personally liable. The court emphasised the mandatory nature of this provision, noting that the liability extends to the administrator and other municipal officers due to their roles in financial management.
Judge Opperman said the fund is not required to seek payment from the employer (in this case, the municipality) first. It may directly pursue claims against responsible officers, such as municipal officials and the administrator.
The fact that some municipal officers held acting positions or that the municipality was under administration was irrelevant. Allowing such defences would encourage enduring impunity and undermine the purpose of the legislative framework.
Municipality’s revenue vs unpaid contributions
The municipality received substantial annual revenue from central government, amounting to R128m in 2023/24 and R138m in 2024/25. Despite these funds, retirement contributions were not paid to the fund as required.
The fund alleged that the municipality intentionally transferred money between its bank accounts to prevent attachment by creditors. This led to a court order requiring:
- Full accounting of withdrawals, payments, and transfers from the municipality’s Absa and First National Bank accounts from 10 October 2023 onwards.
- Copies of the bank statements of the relevant accounts and copies of bank statements for the accounts where the equitable shares are held, as well as the dates on which the municipality expected to receive this revenue.
The court granted this application against all the respondents.
Liability for arrears applies across tenures
Judge Opperman said liability for unpaid contributions applies retrospectively, presently, and potentially into the future. It includes the total claim and debt, regardless of the tenure or capacity of the incumbents.
Section 13A(8) of the PFA imposes personal liability on individuals in specific municipal roles, including the municipal manager, CFO, and mayor. The current incumbents in these positions are held liable for the total arrears and amounts due at the time the claim is instituted, regardless of when the debt accrued.
Liability attaches to the current incumbents, because section 13A(8) focuses on the office rather than the individual’s tenure.
Dismissal of financial constraints as a valid defences
The municipal officers and the administrator admitted that contributions, along with the interest due, remained unpaid but argued that financial constraints prevented payment. They claimed to have made efforts to arrange settlements with the fund, asserting they should not be held personally liable because they “did what they could”.
The court dismissed financial constraints or the doctrine of impossibility as valid defences, saying that the failure to transfer contributions indicates misappropriation, amounting to criminal and civil liability.
The judgment reinforces the principle that individuals responsible for financial governance within the employer must prioritise compliance with the PFA, irrespective of financial constraints or subjective efforts.
Judge Opperman noted that fault is not a requirement for personal liability under section 13A(8)(c) of the PFA.
She said the purpose of section 13A(8) of the PFA is to ensure that the persons comprising the governing body of the employer shall via compulsion be responsible for the payment of the contributions to the fund.
“If the arguments of the second to fifth respondents are presumed to be the situation in law in that they are not liable on the defences raised, then there will be not anyone accountable, and the whole pension system in South Africa will collapse.”
Provincial intervention and administrator’s responsibility
The Free State government, under section 139(5)(c) of the Constitution, intervened in the municipality’s affairs because of its financial crisis. The intervention, effective from 1 June 2022 to 31 May 2024, designated Thomas Lindelo Mkaza as the administrator.
The court found that despite not being the accounting officer, the administrator’s delegated authority imposed significant obligations on him, including issuing directives to the municipal manager to implement recovery measures.
The court highlighted that the administrator’s fiduciary duties and authority to oversee financial matters rendered him accountable under section 13A(8)(c) of the PFA. The court clarified that provincial intervention does not suspend the municipality’s obligations to creditors, including the fund.
Even with the intervention, the municipal council remained intact, and the governing body members (second to fourth respondents) retained their statutory responsibilities. The intervention merely introduced additional oversight to rectify the financial crisis, as outlined in section 139(5)(a) and (c) of the Constitution.
Judge Opperman, referring to judgment handed down in May 2023, reaffirmed that the intervention reinforced, rather than absolved, the administrator’s obligations under the financial recovery framework.
Court orders
The court ordered the Mafube municipality, Mothusi Lepheana (second respondent), Dimakatso Tryphona Tau (third respondent), Tlhoare Motsoeneng (fourth respondent), and Thomas Mkaza (fifth respondent) jointly and severally to pay the MWRF R14 723 639.52, plus interest thereon from 1 February 2024 to date of payment at the rate prescribed by the PFA.
The respondents were also ordered to pay costs of the application on the attorney-client scale, including the costs of two counsel.
