Free State’s Mafube Municipality owes workers’ pension fund R14m, racks up R113m in arrears

30 Jan 2025

The Mafube Local Municipality in the Free State has for years failed to pay its employees’ pension contributions, despite deducting them monthly from salaries and receiving an equitable share from Treasury.

This issue, spanning more than a decade, reflects a broader crisis of noncompliance among municipalities across the province.

A recent Bloemfontein High Court ruling has once again highlighted this failure. The court ordered Mafube Local Municipality, four municipal officers and its appointed administrator to pay R14,723,639.52 – including accrued interest – to the Municipal Workers’ Retirement Fund (MWRF) by 1 February 2025.

This comes after a number of judgments and enforcement attempts, with the municipality’s arrears now exceeding R113-million, according to MWRF representative Themba Mfeka.

Mfeka said they had brought the application against a backdrop of many judgments that the municipality has failed to act on. He said the arrears date back to 2012.

“There have been numerous judgments against the municipality, the execution of which has been blocked by the municipality several times. Apart from this they were also ordered to disclose the bank account to which they had moved their equitable share, but have failed to do so. Currently, they owe more than R113-million, including nonpayment of current contributions,” said Mfeka.

According to Mfeka the municipality’s noncompliance affects members in that they lose funeral cover and risk benefits, as well as investment returns because the money is not invested.

While the Mafube Local Municipality continues to be noncompliant with pension contributions, it continually deducts pension fund contributions from the salaries of its employees and fails to pay them to the fund. This is despite a court order in September 2024 to pay about R38-million.

Nationwide crisis

However, Mafube is not the only municipality guilty of not complying with pension contributions. As of 31 March 2024, 149 municipalities of the total 257 were reported to be in arrears.

This represents 58% of the municipalities in South Africa, which is significant, according to Corlia Buitendag, the departmental head for conduct supervision at the Financial Sector Conduct Authority (FSCA).

Buitendag said that collectively South African municipalities are R1.4-billion in arrears on pension contributions.

Top 10 municipalities in arrears:

!Kheis Local Municipality;

Kai !Garib Local Municipality;

Kopanong Local Municipality;

Mafube Local Municipality;

Mamusa Local Municipality;

Masilonyana Local Municipality;

Mohokare Local Municipality;

Naledi Local Municipality;

Renosterberg Local Municipality; and

Tswaing Local Municipality.

Note: The graph above depicts the number of municipalities per province that are in arrears. Yellow represents the total number of municipalities in a particular province. Blue represents the number of municipalities in arrears as of June 2023 in a particular province. Green represents the number of municipalities in arrears as of March 2024 in a particular province.

“The FSCA has been collecting data for the past two years for the publication. We have observed that municipal finances have deteriorated, with many municipalities under administration.

“From the figures we have gathered, nearly 60% of municipalities are unable to meet their financial obligations to members in retirement funds. Municipalities have budgetary shortfalls that are affecting their ability to fulfil their statutory obligations, including pension fund contribution payments.

“While the FSCA does not have jurisdiction over employers and therefore cannot act directly against the defaulting municipalities, we are, however, working closely with the Auditor-General (AG) on these matters, as the AG has powers to direct municipalities to remedy financial matters,” Buitendag said.

Impact on workers and two-pot retirement system

The pension contribution crisis has also affected the implementation of the new two-pot retirement system, with some workers unable to access their savings due to noncompliance by municipalities.

The South African Municipal Workers’ Union (Samwu) has lodged a formal complaint with the FSCA against MWRF and other noncompliant funds, calling for an investigation into their operations on related matters.

Samwu national spokesperson Papikie Mohale told Daily Maverick that “the issue of nonpayment of the pension fund by municipalities is concerning to an extent that we have employees who to date still write to us with complaints of not getting their pension and retirement funds”.

“Some workers couldn’t receive medical care because their medical aid was suspended after several nonpayments. A man died in the Free State after they could not receive medical care as the medical aid had lapsed despite the money deducted from their salary every month. The same happens when they have to bury loved ones or retire and have nothing to show for their years of service.”

Municipal managers’ role

For Mohale, as chief accounting officers municipal managers have for too long gone unpunished, since ultimate authority lies with them and if anything goes wrong they should take the blame.

“This is why we welcome the Bloemfontein High Court ruling. But what resulted in this situation is that these pension funds are also complicit in failing to send workers timely statements to see how much is on their retirement or pension funds and if it’s growing or not.

“This goes back to the issue of municipalities being underfunded to a point where they do not have money for their operations, which is why they might be using workers’ money to fund operations. What we need to be seeing is a total overhaul of the country’s municipal funding model.”

Mafube Local Municipality had not responded to Daily Maverick’s questions by the time of publication. DM

Categories:

Tags:

DM is much better if you are signed in...

South Africa

Nationwide crisis

Impact on workers and two-pot retirement system

Municipal managers’ role