Mbambisa and Others v Nelson Mandela Bay Metropolitan Municipality (SCA) (unreported case no 272/2023, 8-11-2024) (Schippers, Mokgohloa and Nicholls JJA and Baartman and Masipa AJJA)In terms of s 111, read with s 112 of the Local Government: Municipal Finance Management Act 56 of 2003 (MFMA), a municipality is required to have and implement a supply chain management (SCM) policy compliant with the prescribed regulatory framework. The policy must give effect to the five pillars of procurement: fairness, equity, transparency, competitiveness, and cost-effectiveness, as derived from s 217 of the Constitution. This ensures that public procurement contributes to constitutional democracy by promoting accountability and safeguarding public resources.
Government procurement must uphold the highest standards of integrity and transparency, ensuring it is beyond reproach. Both prospective contractors and the public, as taxpayers, must have confidence in the fairness and reliability of the procurement process (P Bolton The Law of Government Procurement in South Africa (Durban: LexisNexis 2007) at p 70).
The case of Mbambisa serves as a stark reminder in implementing accountability and deterring irregular expenditure. By holding municipal officials personally liable for unauthorised, irregular, and wasteful expenditure, the court buttressed the legal framework governing municipal financial management. This case note explores the significance of Mbambisa, its implications for municipal governance, and its practical challenges.
In 2014, the Nelson Mandela Bay Municipality awarded Erastyle a R 6 million contract to develop a communication and marketing strategy for the Integrated Public Transport System (IPTS) project. This appointment was made without a public procurement process, undermining the municipality’s own SCM policies. These irregularities resulted in inflated payments exceeding R 7,6 million.
The municipality sought orders, declaring the impugned appointment of Erastyle unlawful and invalid; and directing Erastyle and the officials (defendants, appellants at the Supreme Court of Appeal (SCA)) to repay the unlawful payments, jointly and severally. The High Court found in favour of the municipality, holding the officials and Erastyle jointly liable for the irregular expenditure. This approach aligns with the decision in Steenkamp NO v Provincial Tender Board, Eastern Cape 2007 (3) SA 121 (CC), where the Constitutional Court highlighted the critical role of procurement systems in safeguarding public resources and ensuring fair administrative action (paras 33–35).
The officials appealed the findings of the High Court to the SCA, mainly disputing the interpretation of s 32 of the MFMA.
The appeal before the SCA centred on the officials’ liability under s 32 of the MFMA. The officials argued that s 32 did not impose personal financial liability absent direct municipal loss. The SCA dismissed this argument, holding that the officials were liable for irregular expenditure resulting from their negligence or deliberate misconduct. The court clarified that compliance with SCM policies is non-negotiable, irrespective of perceived municipal benefits (Mbambisa at paras 54–56). It is submitted that the SCA decision is reinforced by AllPay Consolidated Investment Holdings (Pty) Ltd and Others v Chief Executive Officer, South African Social Security Agency, and Others 2014 (1) SA 604 (CC) at para 27, where the Constitutional Court emphasised that adherence to procedural safeguards enhances fairness, efficiency, and transparency while acting as a safeguard against corruption.
Section 32 focuses on recovering irregular, unauthorised, or wasteful expenditure from officials responsible for incurring it, irrespective of whether the municipality suffered a loss. Section 176(1), by contrast, provides immunity for officials acting in good faith, while
s 176(2) allows municipalities to recover losses resulting from intentional or negligent misconduct.
The SCA in Mbambisa at paras 54–56, correctly emphasised that these provisions operate independently. Section 32 liability is triggered by the occurrence of irregular expenditure, ensuring accountability even where good faith is claimed. As noted in Steenkamp at para 51, this interpretation aligns with the overarching goal of deterring financial impropriety.
While Mbambisa is a positive precedent, the decision, arguably, presents certain practical challenges. By way of an example, the court’s broad interpretation of liability may be perceived as overly harsh, potentially discouraging municipal officials from undertaking initiatives due to fears of personal financial repercussions. This rigid stance may deter officials from making proactive decisions that, while legally compliant, may involve calculated risks. The court’s strict interpretation of s 32 may inadvertently create an environment where officials are hesitant to make decisions that, although beneficial and lawful, entail a degree of risk, as these may be scrutinised as irregular expenditure. By the same token, the decision may result in overly cautious decision-making by municipal officials, potentially delaying municipalities in responding promptly to community needs.
In addition, s 176(1) of the MFMA provides immunity to officials acting in good faith; however, the decision does not comprehensively clarify how this protection might apply in cases of unintentional procedural lapses. This ambiguity may result in inconsistent applications in future cases, as officials may face liability for errors made without malicious intent. While adherence to SCM policies remains critical, municipalities are likely to encounter scenarios where unique or emergency circumstances make strict compliance with procurement procedures impractical. The judgment could have benefitted from offering clearer criteria for justified deviations from SCM policies.
Mbambisa is an essential reminder for municipal officials, particularly those in procurement or financial roles. Key takeaways include the imperative for municipal officials to rigorously follow SCM policies, understanding that non-compliance may result in personal financial liability, regardless of perceived benefits to the municipality. Officials must ensure their actions are both legally compliant and properly documented to defend against potential claims of irregular expenditure. The case highlights the need for interdepartmental collaboration, as financial decisions frequently require oversight from multiple officials. Officials should prioritise transparency and seek proper authorisations to prevent non-compliance arising from oversight or miscommunication. In addition, Mbambisa highlights the MFMA’s intent to ensure responsible financial management. By upholding the mandatory recovery of funds under s 32, the court sends an unequivocal message to municipal officials that non-compliance with SCM policies may result in personal liability. The court’s interpretation of s 32 as a self-standing provision requiring no proof of municipal loss or benefit underscores its emphasis on adherence to legal processes rather than outcomes alone.
Arguably, Mbambisa serves to incentivise municipalities to implement their SCM policies strictly, knowing that the courts’ supports stringent action against officials involved in irregular procurement practices. Also, by holding municipal officials accountable for irregular expenditure, Mbambisa ensures that public funds are utilised as intended, enhancing the provision of essential services like water, sanitation, roads, and public transport to the people, potentially increasing public trust in local governance.
In conclusion, Mbambisa is a stark reminder of accountability for municipal governance, promoting responsible financial management and offering a clear warning to municipal officials about the serious personal repercussions of financial misconduct. While the decision presents challenges, its ultimate message is one of accountability and compliance: that municipal resources must be managed in a manner that genuinely serves the public interest. Through sustained implementation of SCM policies and an emphasis on education and support for officials, municipalities can ensure that the principles underscored by Mbambisa translate into lasting improvements in governance, fostering a municipal environment where accountability and service delivery go hand in hand.
Mbambisa establishes a useful precedent, emphasising legal compliance and responsible financial management in local governance. While its strict liability approach presents challenges, Mbambisa ultimately fosters a culture of transparency and integrity in the use of public resources, potentially leading to improved service delivery and increased public trust in municipal governance. It is hoped that municipalities will heed the guidance and lessons set by Mbambisa, and that we will see more cases under s 32 of the MFMA where procurement legislation and policies have been disregarded. Moreover, Mbambisa presents an opportunity for municipalities to adopt a proactive approach in implementing SCM policies. To ensure the practical application of Mbambisa, municipalities should prioritise structured training for officials on procurement laws and the potential consequences of non-compliance. Regular audits, transparent reporting mechanisms, and clear communication of financial management policies will support a culture of accountability, helping municipal officials understand the critical role they play in safeguarding public resources. In particular, compliance training should underscore the personal liabilities under s 32, ensuring that officials who bypass SCM policies are held personally liable for irregular expenditure, regardless of any perceived benefit to the municipality.
Aphiwe Kondlo LLB (UWC) is a Legal Adviser in Cape Town.
This article was first published in De Rebus in 2025 (March) DR 42.
