Recently, the SCA delivered a groundbreaking judgment in Mbambisa v Nelson Mandela Bay Metropolitan Municipality, finding former officials of the Nelson Mandela Municipality personally liable for incurring irregular expenditure.
In this case, the Municipality sought to recover just over R7.6 million from former officials who approved an increase in the value of a service contract – absent a public tender process and in violation of the Municipality’s internal Supply Chain Management Policy. Relying on section 32(1)(c) of the Municipal Finance Management Act (‘the Act’), the Municipality contended that the officials had negligently and unlawfully authorised payments to a service provider. The Municipality maintained that it was entitled to recover this irregular expenditure from these individuals.
Conversely, the officials argued that section 32(1) of the Act should not be interpreted to mean that authorised personnel are financially liable for the impugned expenditure in their personal capacity. Rather, the officials submitted that Parliament intended ‘liable’ to mean ‘legally answerable’ or ‘accountable’ in the context of local government spending.
Adopting a purposive and contextual interpretation of section 32 of the Act, the SCA held that the provision clearly and unambiguously establishes a statutory claim for the recovery of unauthorised, irregular, or wasteful and fruitless expenditure from municipal officials, political office-bearers, and accounting officers who deliberately or negligently incur such expenditure. Indeed, section 32(2) of the Act statutorily obligates municipalities to recover this money from the aforesaid categories of persons.
Accordingly, section 32 operates as a penalty clause and is not dependent upon a municipality sustaining damage or loss. Ultimately, this reflects the seriousness with which Parliament views irregular expenditure.
