National Treasury: Nelson Mandela Bay R23bn UIFWE Write-Off Unlawful

• National Treasury blocked Nelson Mandela Bay's proposed R23 billion write-off of unauthorised, irregular, fruitless, and wasteful expenditure (UIFWE).
• Deputy Director-General Ogalaletseng Gaarekwe declared the write-off unlawful on August 19, citing non-compliance with Section 32 of the Municipal Finance Management Act.
• The city's Municipal Public Accounts Committee chair and Mayor had backed the write-off without conducting an essential item-by-item investigation.
• Opposition parties, including the ACDP and DA, had complained to Treasury, prompting the intervention.
• The city subsequently postponed a council meeting scheduled to address the UIFWE matter.

The intervention by National Treasury underscores a strict interpretation of Section 32 of the Municipal Finance Management Act, clarifying that blanket write-offs of unauthorised, irregular, fruitless, and wasteful expenditure without thorough investigation are deemed unlawful.

Nelson Mandela Bay's ruling coalition has faced accusations of hypocrisy from opposition parties after National Treasury intervened to block a proposed R23 billion write-off of unauthorised, irregular, fruitless, and wasteful expenditure (UIFWE). The city's Municipal Public Accounts Committee (MPAC) chair, Luxolo Namette, and Mayor Babalwa Lobishe, had previously supported the substantial write-off, a move that bypassed critical due diligence.

The ACDP in Nelson Mandela Bay specifically highlighted the perceived U-turn, noting that the officials are now presenting themselves as proponents of accountability despite their earlier backing of the write-off without a proper investigation. This proposed action would have allowed the municipality to disregard the R23 billion in questionable spending without first undertaking a detailed review of each item.

The city was compelled to postpone a council meeting that had been scheduled to deliberate on the UIFWE matter, following the direct intervention from the national government. This development underscores the significant oversight role played by National Treasury in municipal financial affairs, particularly concerning large-scale financial irregularities.

The decisive action by National Treasury came on August 19, when Ogalaletseng Gaarekwe, the Deputy Director-General for Intergovernmental Relations, informed the Nelson Mandela Bay municipality that the proposed R23bn UIFWE write-off was unlawful. Gaarekwe explicitly stated that MPAC's recommendation for a blanket write-off failed to comply with the stringent requirements of Section 32 of the Municipal Finance Management Act (MFMA).

This critical intervention followed complaints lodged with Treasury by opposition parties, including the ACDP and the DA. These parties had warned that the recommendation to write off the unauthorised, irregular, fruitless, and wasteful expenditure was unlawful precisely because it circumvented due process, specifically the requirement for an item-by-item investigation. The MFMA mandates a thorough process to address such expenditures, which was notably absent from the city's initial proposal.

Treasury's directive clarified that a municipality cannot simply erase significant financial irregularities without first establishing the circumstances surrounding the expenditure. This strict interpretation of MFMA Section 32 municipal write-off procedures aims to prevent municipalities from sidestepping their responsibilities in managing public funds.

The investigation that the Nelson Mandela Bay municipality sought to bypass is fundamental to good governance and Nelson Mandela Bay municipal accountability. Such an inquiry is designed to establish liability for the unauthorised, irregular, fruitless, and wasteful expenditure, determine whether funds can be recovered from responsible parties, ensure appropriate consequence management for those involved, and identify any matters that warrant criminal investigation. The absence of these steps renders any write-off illegitimate.

This incident serves as a crucial precedent, clarifying National Treasury's strict interpretation of Section 32 of the MFMA regarding the write-off of unauthorised, irregular, fruitless, and wasteful expenditure in South Africa. It reinforces that municipalities must adhere to due process, including thorough investigations to establish liability and recover funds. Blanket write-offs without such foundational steps are unequivocally deemed unlawful and will be challenged by national authorities.

For legal professionals advising South African municipalities, this development underscores the imperative to ensure clients meticulously follow all prescribed procedures. The National Treasury blocks NMB UIFWE action highlights that accountability for public funds cannot be circumvented through administrative shortcuts, thereby reinforcing the integrity of municipal financial management frameworks.

This development clarifies National Treasury's strict interpretation of Section 32 of the MFMA regarding the write-off of unauthorised, irregular, fruitless, and wasteful expenditure (UIFWE). Lawyers advising South African municipalities must ensure their clients adhere to due process, including thorough investigations to establish liability and recover funds, as blanket write-offs without such steps are deemed unlawful and will be challenged.

Source: Original reporting via AllAfrica