UNCOOPERATIVE GOVERNANCE: Plan to write off R23bn is illegal, Treasury tells Nelson Mandela Bay

The National Treasury has made no bones about the unlawfulness of the manner in which Nelson Mandela Bay (NMB) metro is trying to write off R23-billion in unauthorised, irregular, fruitless and wasteful expenditure (UIFWE).

In response to questions from the Daily Maverick, the Treasury said that if the council approves the staggering R23-billion write-off without following proper procedures, officials will be required to provide evidence of the processes undertaken by 31 October.

This comes after NMB’s Municipal Public Accounts Committee (MPAC) earlier this month recommended writing off R23-billion in UIFWE without the requisite item-by-item investigation required by the Municipal Finance Management Act (MFMA).

The R23-billion was accumulated from 2009 to 2021.

The Treasury said this would mean that the municipality’s process is not aligned with the requirements of section 32 of the MFMA, and that a council resolution supporting the MPAC recommendation would be unlawful.

Section 32 of the MFMA requires a municipality to recover UIFWE from the person liable for it, unless a council committee has investigated the expenditure, found it to be irrecoverable and recommended that it be written off.

The Treasury said the metro has to submit quarterly reports and supporting evidence for the write-off.

“They must also demonstrate achievement of the applicable UIFWE processing and reduction requirements. Additionally, by 31 October, affected municipalities must demonstrate processing of outstanding matters as at 30 June 2026 through the required legal processes. What will be important is for municipalities to ensure that all processes are compliant with the relevant provisions in the MFMA.”

In a letter to the National Treasury, the acting city manager, Lonwabo Ngoqo, communicated MPAC’s decision and attached an unsigned affidavit aimed at opening a police investigation into the UIFWE.

However, the Treasury was not impressed with the steps undertaken by MPAC.

In a letter to the City dated 19 August, the Treasury’s deputy director-general for intergovernmental relations, Ogalaletseng Gaarekwe, said an item-by-item assessment means that UIFWE recoverability must be considered at the level at which it was actually incurred.

“It does not mean a single assessment for an entire financial year, directorate, contract or aggregated register balance. Each individual amount must be examined on its own facts, including each invoice, payment, transaction, purchase order, or other discrete item of expenditure giving rise to UIFWE,” wrote Gaarekwe.

The Treasury said the municipality must determine, for each amount, the person potentially liable, the basis of liability, when the municipality knew or reasonably ought to have known the relevant facts and the recovery steps taken.

At the MPAC meeting, attorney Warren Parker advised councillors that under the Prescription Act, such debts lapse after three years – meaning if recovery isn't pursued within that window, it can no longer be legally invoiced.

He explained that the UIFWE was now prescribed and could no longer be legally recovered.

Gaarekwe said the affidavit refers to prescription commencing 15 days after 30 June 2023 and then gives the date 15 July 2023.

“Since prescription is central to the proposed write-off, the dates and legal basis should be verified before the matter proceeds. The affidavit asks MPAC to investigate and recommend that all UIFWE on the register as at 30 June 2021 be written off as irrecoverable due to prescription,” she said.

“This appears inconsistent with the requirement of an item-by-item assessment. The inconsistency is clearer when the unsigned affidavit is considered. For the 2022 and 2023 financial years, the affidavit states that irrecoverability should only be determined after an item-by-item assessment.

“No clear legal basis is provided for applying an individual assessment from 2022 onwards while applying a broad financial-year approach to earlier expenditure. The same legal test should apply to each claim. The National Treasury cannot support a blanket conclusion or recommendation that all UIFWE up to 30 June 2021 has prescribed.”

Gaarekwe indicated the unsigned affidavit is legally defective because it seeks a broad write-off without first completing the required item-by-item assessment. 

She said any decision by MPAC or the council based on this defective process would be unlawful and expose responsible officials and councillors to misconduct proceedings. 

“The affidavit, whether unsigned or signed, should therefore not be served before MPAC or council in its present form.”

Opposition councillors from the ACDP and DA voted against the write-off at the MPAC meeting, with the ANC and EFF, who are in a coalition government, pushing it through by a majority vote.

ACDP councillor Lance Grootboom and DA councillor Gert Engelbrecht wrote to the Auditor-General and Treasury reporting what they termed an illegal decision by MPAC, which prompted Gaarekwe’s correspondence to the City.

Grootboom welcomed the intervention by Treasury and the further scrutiny of the matter.

“The ACDP maintains that the age of historic expenditure cannot, on its own, be treated as sufficient grounds for simply writing off public money. Each transaction must be dealt with in accordance with the requirements of the MFMA, applicable National Treasury regulations and directives, and the municipality’s legal obligations regarding accountability and recovery.

“The ACDP refused to sit back while an attempt was being made to process a blanket write-off. We raised our concerns through the appropriate oversight channels and urgently brought the matter to the attention of National Treasury and the Auditor-General.”

Engelbrecht said the DA would continue to push for transparency, accountability and a proper investigation into every transaction. 

“This is exactly why the DA raised the matter with the National Treasury in the first place. We were concerned that an amount of this magnitude was being dealt with as one blanket write-off instead of properly examining the individual transactions and establishing how this expenditure was incurred and whether those responsible can still be held accountable."

EFF councillor and MMC for budget and treasury, Khanya Ngqisha, said his party “supported the recommendation that, where MPAC is satisfied with the matter and the applicable requirements have been met, the specified amounts should be recommended to council for write-off. This is the proper process, as MPAC makes recommendations to council, while council remains the final decision-making authority on the matter."

He said the EFF caucus would discuss the matter internally and present its final position when the issue comes before council.

ANC councillor Xolani Notshe said the National Treasury correspondence has yet to be tabled in council and therefore he was not in a position to comment. Municipal spokesperson Sithembiso Soyaya had not responded by the time of publication. DM