Nearly R38 million in pension fund contributions, deducted from employees’ salaries by the Mafube Municipality in the Free State, has mysteriously disappeared, prompting legal action by the Municipal Workers Retirement Fund.
THE question regarding where nearly R38 million went to which the Mafube (Frankfort) Municipality in the Free State deducted from its workers as their pension fund contributions, but which the municipality never paid to the pension fund, has come under legal scrutiny.
The Municipal Workers Retirement Fund turned to the Bloemfontein High Court in a bid to get a closer look at the municipality’s banking records.
The fund earlier obtained an order that the municipality had to pay nearly R38m to the fund in regard to the pension contributions. The municipality never paid the money and the fund subsequently obtained a writ of execution against the municipality.
But it emerged that the municipality only had R97,000 left in its account. The fund now wants to know where the rest of the money went.
The municipality is a participating employer in the fund and has many employees registered as members. Arrear pension fund contributions for its employees have always been a major issue resulting in many court orders and writs of execution against the municipality for payment.
Consequently, the municipality, too, has brought many unsuccessful applications to stay writs of execution.
In September 2021, the municipality was ordered to pay the fund an amount of R37,795,000, with interest and costs. Subsequently, the municipality’s bank accounts were attached by the fund, while the sheriff executed the writ. Only R97,000 was available in the municipality’s bank account which was then paid to the fund.
The judgment debt still stands for arrear pension fund contributions from the municipality for its employees. The fund now endeavours to retrieve the arrear amount for its members by seeking past and future information in respect of the municipality’s bank accounts to give effect to its current court order.
It is not in dispute by the municipality that it has deducted pension fund contributions from the salaries of its employees and failed to pay it over to the fund. However, no explanation was forthcoming about what happened to the money.
It is also not in dispute that the municipality receives an equitable share annually: for the previous financial year an amount of R128 million was received, and for the 2024/2025 financial year an amount of R138 million was received.
Arrear pension payments are still not forthcoming, despite these large amounts of equitable shares received and to be received by the municipality.
The fund claimed that the municipality has the money it received from its employees and has moved money from one account to another to avoid the fund from attaching it. It now asked the court for an order forcing the municipality to furnish a full accounting of each and every withdrawal, payment or transfer from their banking accounts from October last year to date.
When judgment was granted against the municipality for the payment of nearly R38m to the fund, the municipality offered payment of 25% of the judgment debt, but the fund declined the offer and proceeded with its writ of execution by attaching the municipality’s bank accounts via the sheriff.
The sheriff only received R97,000 from Absa and paid it to the fund.
The court noted that there is an ongoing non-compliance from the municipality to pay its employees’ pension fund contributions to the fund. An application was launched in 2011 by the fund for non-payment where judgment was granted in 2015 and the municipality eventually made partial payment to the Fund.
In 2019 the fund brought a similar application against the municipality, seeking judgment for R25.4m. Then, too, it was not in dispute that the municipality owed money to the fund in respect of its employees’ pension fund contributions.
The municipality also did not pay the arrear contributions to the fund in that matter. Instead, it launched an unsuccessful appeal during which a judge at the time commented: “This practice by the municipality seems to have continued over the years; frivolous defences and non-payment of its employees’ pension fund contributions still remains unabated.”
In this present matter, the court said: “The disappearance of the money of the employees of the municipality and members of the fund remains questionable.”
It was noted that the municipality would rather challenge each and every application brought to assist the pension fund members rather than pay its employees’ money to the Fund.
“There is a mysterious delay rather than a solution to an ongoing undisputed problem, namely the non-payment of the arrear pension monies of the fund’s members to the fund by the municipality,” the court said.
Meanwhile, members receive less benefits if retrenched or upon resignation, with some possibly not receiving any benefits at all. The court noted that this situation has devastating consequences for them and their families.
It was further noted that the municipality has not pleaded bankruptcy or any similar notion, “yet it offers naught but silence on the issue of its members’ monies”.
The court said it is now time to act and force the municipality to disclose all the necessary documentation that the fund requires to enforce the court order and writ of execution.
