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Hawks probe Eastern Cape municipality for R2.2 billion in unpaid pension fund contributions



Published Oct 25, 2021


The Hawks are probing the Dr Beyers Naude Municipality in the Eastern Cape for failing to pay R2.2 billion in employee contributions to the pension fund.

Police Minister Bheki Cele has confirmed that the Directorate for Priority Crime Investigation’s (Hawks) was investigating the non-payment of employee contributions as it was a contravention of the Pension Funds Act.

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“The investigation is progressing and three affidavits have been obtained with bank statements, which have been analysed.

“Affidavits from five identified persons are outstanding and the Investigation pan for obtaining the affidavits is in place,” he said.

Cele revealed this while responding to parliamentary questions from DA MP Samantha Graham.

Graham laid charges in December 2020 after former finance minister Tito Mboweni indicated that 25 municipalities had deducted nearly R3 billion in employee contributions to pension funds.

The Dr Beyers Naude Municipality had not paid R2 598 207 482.

Newly-appointed Finance Minister Enoch Godongwana recently said that the National Treasury had written to the municipality in Graaff-Reinet early in October 2020 to pay the outstanding debt.

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Godongwana said his department had warned the municipal manager that it was a criminal offence not to pay over pension contributions.

The municipal manager, he said, responded in late October 2020 acknowledging the debt and committed to settle all the outstanding amounts.

“National Treasury is aware that by 15 December 2020, the municipality did not follow through on its commitment to settle all the outstanding amounts, but has made a number of payments since January 2021, including current and outstanding debt.

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“To date as at 08 September 2021, the total outstanding pension debt is at R16.4 million, which is a reduction by 50 per cent since January 2021.”

The Municipality was required to pay over pension contributions within seven days of the end of the month in terms of Pension Funds Act.

The principal officer of the pension fund was also required to bring the non-compliance to the attention of the affected members, and advise the Financial Sector Conduct Authority of action taken.

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“If the non-compliance persists after 90 days, the principal officer must report the matter to the SAPS. Should the Board of the fund not take the requisite action against the employer, it may face regulatory action,” Godongwana added.

He said the national treasury did not have the power to take direct measures against defaulting municipalities.

“The powers of the National Treasury are very limited in following up on non-payment by municipalities, and can only intervene via a province in terms of section 139 of the constitution,” he said.

However, the minister said his department was working on amending the Public Finance Management Act and the Municipal Finance Management Act, to put in place a stronger framework to deal with non-payment of tax, pension contributions as well as to suppliers like Eskom and Water Boards.

The National Treasury presently has the power to stop the transfer of the equitable share funds to a municipality in the event of persistent failure by a municipality to honour its financial commitments.

“Failure for municipalities to provide this evidence may result in their equitable share being withheld in an effort to enforce compliance.”

Godongwana said the national department’s power was often restricted to a form of moral persuasion and naming and shaming.

“If it is suspected that there is a case of criminal actions to refer such matter to the police for further action.”

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Political Bureau