Pietersen v S (A309/2017) [2019] ZAWCHC 93 (6 February 2019)

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[2019] ZAWCHC 93
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Pietersen v S (A309/2017) [2019] ZAWCHC 93 (6 February 2019)

SAFLII
Note:
Certain
personal/private details of parties or witnesses have been
redacted from this document in compliance with the law
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SAFLII
Policy
Republic
of South Africa
IN THE HIGH COURT OF
SOUTH AFRICA
(WESTERN CAPE DIVISION,
CAPE TOWN)
Case
No:
A309/2017
Before:
The Hon. Mr Justice Binns-Ward
The
Hon. Ms Justice Davis (Acting)
Hearing:
30 November 2018
Judgment:
6 February 2019
In
the matter between:
MARTIN
NOEL
PIETERSEN
Appellant
and
THE
STATE
Respondent
JUDGMENT
DAVIS, AJ (BINNS-WARD, J
concurring):
Introduction
1.
This appeal arises from the conviction of a municipal accounting
officer in respect of various statutory offences in terms of
the
Local Government: Municipal Finance Management Act 56 of 2003 ("the
MFMA").
2.
The appellant was tried in the Oudtshoorn Regional Court on five
counts of contravening the MFMA when he occupied the position
of
municipal manager and accounting officer of the Oudtshoorn
Municipality (“the Municipality"). It was alleged in the

charge sheet that during the period between 24 August 2010 and July
2011 the appellant contravened the following sections of the
MFMA:
2.1
s 173(1)(a)(i)
[1]
read with s 61(2)(b)
[2]
,
in that he deliberately or in a grossly negligent way used the
position or privileges of accounting officer for personal gain
or to
improperly benefit another person, namely Ian Kenned and/or IBR
Consultants ("the first count");
2.2
s 173 (1)(a)(i)
[3]
read with s 62(1)
[4]
,
in that he deliberately or in a grossly negligent way failed to
manage the financial administration of the Municipality and to
take
all reasonable steps to ensure that:
2.2.1
the resources of the Municipality were used effectively, efficiently
and economically; and/or
2.2.2
full and proper records of the financial affairs of the municipality
were kept in accordance with any prescribed norms and
standards;
and/or
2.2.3
the Municipality had and maintained effective, efficient and
transparent systems of financial risk management and internal
control
and/or of internal audit operating in accordance with any prescribed
norms and standards; and/or
2.2.4
unauthorised, irregular or fruitless and wasteful expenditure and
other losses were prevented; and/or
2.2.5
the Municipality had and implemented a supply chain management policy
in accordance with Chapter 11 of the MFMA {''the second
count"):
2.3
s 173(1)(a)(i)
[5]
read with s 65(2)(a)
[6]
,
in that he deliberately or in a grossly negligent way failed to take
all reasonable steps to ensure that the Municipality had
and
maintained an effective system of expenditure control, including
procedures for the approval, authorisation, withdrawal and
payment of
funds ("the third count"):
2.4
s 173(1)(a)(i)
[7]
read with s 65(2)(i)
[8]
,
in that he deliberately or in a grossly negligent way failed to take
all reasonable steps to ensure that the Municipality's supply
chain
policy referred to in s 111 of the MFMA was implemented in a way that
was fair, equitable, transparent, competitive and cost-effective

("the fourth count"):
2.5
s 173 (1)(a)(iii)
[9]
of the MFMA, in that he deliberately or in a grossly negligent way
failed to take all reasonable steps to prevent unauthorised,

irregular or fruitless and wasteful expenditure (“the fifth
count").
3.
The appellant, who was legally represented throughout his trial,
pleaded not guilty to the charges. He was convicted on all counts
on
7 December 2016 and sentenced on 31 March 2017 to a term of five
years' imprisonment; all counts being taken together for purposes
of
sentence. The appellant appeals against his conviction with the leave
of the court a
quo.
4.
The charges arose out of the
appellant's appointment of IBR Consultants ("1BR")
[10]
to act as service providers to the Municipality on the strength of a
deviation from the requirements of the Municipality's Supply
Chain
Management Policy which the State maintains was unlawful, and
payments made to IBR which were said to amount to unauthorised,

irregular or fruitless and wasteful expenditure. One Ian Kenned (“lan
Kenned"), a former municipal manager of Stellenbosch

Municipality, was the sole member of IBR.
5.
In terms of s 111 read with s
112 of the MFMA a municipality is obliged to have and implement a
supply chain management policy that
is fair, equitable, transparent,
competitive, cost-effective and compliant with the prescribed
regulatory framework for municipal
supply chain management. On 25
October 2007
[11]
the Oudtshoorn Municipality adopted a Supply Chain Management Policy
("the SCM Policy") which is identically worded in
all
material respects to the
Municipal Supply Chain Management
Regulations promulgated
by the National Treasury in terms of the MFMA
in GN 868 of 2000 dated 30 May 2005 ("the SCM Regulations").
6.
Regulation 19 of the SCM
Regulations stipulates that a municipality may procure goods or
services above a transaction value of R
200 000 (inclusive of VAT)
and long term contracts
[12]
only through a competitive bidding process. Furthermore, no
requirement for goods or services above an estimated transaction
value
of R 200 000 may deliberately be split into parts or items of a
lesser value merely for the sake of procuring the goods or services

otherwise than through a competitive bidding process. Regulation 12
provides that when determining transaction values, a requirement
for
goods or services consisting of different parts or items must as far
as possible be treated and dealt with as a single transaction.
7.
In terms of Regulation 35 an accounting officer of a municipality may
procure consulting services, taking into account Treasury
guidelines.
A contract for the supply of consultancy services must be procured
through a competitive bidding process if the value
of the contract
exceeds R 200 000 or the duration of the contract exceeds one year.
8.
Section 36 of the SCM Policy, which is based on Regulation 36, deals
with deviations from, and ratifications of minor breaches
of, the
prescribed procurement processes. It reads as follows:
"36 (1) The accounting officer
may
(a)
dispense with the official procurement processes established by this
policy and procure any required goods or services through
any
convenient process, which may include direct negotiations, but only -
(i) in an emergency
(ii) if such goods or services are
produced or available from a single provider only;
(iii) for the acquisition of special
works of art or historical objects where specifications are difficult
to complete;
(iv) acquisition of animals for zoos
and/or nature and game reserves; or
(v)  in any other exceptional
case where it is impractical or impossible to follow the official
procurement processes; and
(b)
ratify any minor breaches of the procurement processes by an official
or committee acting in terms of delegated powers or dudes
which are
purely of a technical nature.
(2) The accounting officer must record
the reasons for any deviations in terms of sub­ paragraphs (1)(a)
and (b) of this policy
and report them to the next meeting of the
council and include as a note to the annual financial statements."
9.
When the appellant appointed
IBR to act as consultants to the Municipality, he purported to do so
by way of a deviation in terms
of s 36 of the SCM Policy. The
validity or otherwise of this deviation lies at the heart of the
State's case. If the appointment
of IBR was a valid exercise of the
appellant's power to deviate from the requirements of the SCM Policy,
the charges relating to
irregular expenditure and failure to
implement supply chain management policy cannot be sustained. If,
however, the deviation were
unlawful and invalid, that would mean
that there was a violation of supply chain management policy which
resulted in irregular
expenditure,
[13]
and if the appellant acted deliberately or in a grossly negligent way
in regard to the deviation, he would be criminally liable
under the
MFMA for his violation of the SCM Policy and any resultant irregular
expenditure.
The
judgment of the court a
quo
10.
As mentioned, the court
a quo
found the appellant guilty on
all five counts. The magistrate found that the appellant was not a
credible witness and that the State
witnesses were all satisfactory.
She neglected, however, to analyse the requirements of each of the
statutory offences with which
the appellant was charged and to
consider whether the evidence adduced by the State satisfied the
particular requirements of the
statutory provisions underpinning each
of the charges.
11.
For instance, she omitted to deal in her judgment with the
definitions of unauthorised, irregular and fruitless and wasteful

expenditure in terms of the MFMA, which are crucial to the second and
fifth counts. She also failed to appreciate that expenditure
which
would otherwise be unauthorised can be rectified in terms of an
adjustment budget dully passed in accordance with the MFMA.
12.
In addition, the judgment
contains a number of factual misdirections and is replete with
sweeping statements and inferences which
do not meet the second leg
of the well-known test for drawing inferences in
R
v Blom.
[14]
13.
No useful purpose would be served by cataloguing the various errors
and misdirections in the judgment of the court a
quo.
They
will be referred to below, where necessary, in the course of dealing
with the various counts.
Application
to receive new documentary evidence on appeal
14.
Before turning to merits of the appeal it is appropriate first to
deal with the application by the appellant to introduce additional

documentary evidence before the court on appeal. The application was
opposed by the State.
15.
The documents sought to be introduced were the following:
15.1 Oudtshoorn Municipality
representation letter to the Auditor General of South Africa CC the
Auditor General") dated 15
June 2011;
15.2 Oudtshoorn Municipality Annual
Financial Statements for the year ended 30 June 2011;
15.3 Oudtshoorn Municipality Annual
Report on Deviations from July 2010 to 30 June 2011;
15.4 The Report of the Auditor General
on Oudtshoorn Municipality for the year ended 30 June 2011;
15.5 Minutes of a meeting of the
Financial Services Portfolio Committee of Oudtshoorn Municipality
held on 8 September 2011;
15.6 Memorandum dated 3 February 2011
addressed by the Municipal Manager to the Chief Financial Officer of
Oudtshoorn Municipality
requesting approval to overspend the
professional services vote and rectify the expenditure by means of an
adjustment budget.
16.
The test for adducing further
evidence on appeal is well-established. The requirements are that a)
there should be a reasonably
sufficient explanation for why the
evidence was not lead at the trial; b) there should be a
prima
facie
likelihood of the
truth of the evidence and c) the evidence should be materially
relevant to the outcome of the trial.
[15]
17.
The third of these requirements presents an insurmountable obstacle
for the appellant for the reasons which follow.
18.
The representation letter to the Auditor General, although dated 15
June 2011, is for the year ended 30 June
2010,
as opposed to
2011, and therefore has no bearing on the charges faced by the
appellant, which related to the year ended 30 June
2011.
19.
The Municipality's Annual Financial Statements for 2011 are sought to
be introduced into evidence because they refer to expenditure
of R 2
082 093.00 in respect of the IBR deviation and contain a statement
that, "A//
the deviations were ratified by the Municipal
Manager and reported to Council."
20.
The Annual Report on Deviations from July 201O to 30 June 2011 is
sought to be introduced because it purportedly shows compliance
with
s 36(2) of the SCM Policy, which requires that the reasons for
deviations be recorded and reported to council at the next
council
meeting and included as a note to the annual financial statements.
21.
The introduction into evidence of the documents referred to in the
preceding two paragraphs would take the matter no further.
In the
first instance, a municipal council merely performs an oversight
function in respect of deviations. As a matter of law it
cannot, by
purportedly “ratifying" or "approving" a
deviation, cure an unlawful deviation which does not comply
with
supply chain management requirements. It is therefore irrelevant that
the deviation was reported to the council and referred
to in the
annual financial statements. In the second instance, the Annual
Report on Deviations from July 2010 to 30 June 2011,
far from proving
compliance with s 36(2) of the SCM Policy, actually shows that the
requirements of that section were
not
complied with because
the deviations were only reported to council on 22 June 2011 whereas
the SCM Policy required that all deviations
be reported to council at
the next council meeting. Therefore the IBR deviation should have
been reported to council at the next
quarterly council meeting after
26 August 2010 when the deviation memorandum was signed.
22.
What was presented in the application as being the Auditor General's
Report for the Municipality for 2011 is in fact only part
of the
report. It is an incomplete document. And the parts included contain
portions which, far from assisting the appellant, are
damning to his
case. The Auditor General reported that,
"The accounting
officer did not take reasonable steps to prevent unauthorised,
irregular, fruitless and wasteful expenditure,
as
required by
section 62(1)(d) of the MFMA"
and that,
"Management
did not implement adequate monitoring controls over compliance to
[sic]
laws and regulations which resulted in various instances
of non-compliance to the MFMA, Municipal SCM regulations and
preferential
policy framework act
[sic]
being identified."
23.
It goes without saying that the (incomplete)
Auditor General's Report could not serve to alter the outcome of the
trial.
24.
The minutes of the meeting of the Financial Services Portfolio
Committee of Oudtshoorn Municipality held on 8 September 2011
are
sought to be introduced in order to prove that the council did in
fact consider the Annual Report on Deviations referred to
above and,
presumably, to show that no irregularities were noted in respect of
the IBR deviation.
25.
As has already been stated, a municipal council cannot legally ratify
or approve and unlawful deviation from the SCM Regulations.
It merely
exercises an oversight function and has the power to investigate and
take further action in respect of suspect deviations.
The fact that
it has failed to do so does not justify an inference that the
deviation was proper for the irregularity might simply
have been
undetected - or overlooked - by the council.
26.
The minutes of the Financial Services Portfolio Committee Minutes
therefore have no bearing on the outcome of the trial.
27.
Finally, the appellant's Memorandum to the CFO dated 3 February 2011
was before the court
aquo
as an exhibit and already forms part
of the appeal record. The application to place it before the court on
appeal as new evidence
was obviously made in error.
28.
In short, none of the documents sought to be introduced as new
evidence are materially relevant to the outcome of the trial
and
could not serve to alter the result on appeal. The application to
introduce further documentary evidence therefore falls to
be
dismissed. Indeed, counsel for the appellant essentially conceded as
much when the aforegoing problems with the application
were raised by
us with him during argument.
The
deviation
29.
It is convenient to commence with a consideration of the deviation,
since, as mentioned, the validity or otherwise of the deviation
was
the crux of the State's case against the appellant. I shall begin by
sketching the factual context.
30.
The appellant had been suspended from his position as municipal
manager in November 2008. He had challenged his dismissal and
was
subsequently reinstated pursuant to a settlement reached with the
Municipality. He returned to work on 10 August 2010. It was
common
cause that political control of the municipality altered on 3 August
2010, shortly before the appellant returned to work,
with the African
National Congress (ANC) replacing the Democratic Alliance (DA) as the
governing party.
31.
It was also common cause that at the time a number of senior
municipal officials had been suspended, or were facing suspension,

for alleged transgressions uncovered in a forensic investigation and
report done by one Barnard ("the Barnard report")
on
misconduct on the part of municipal officials. An investigation was
also under way by an Advocate Giliomee into alleged misconduct
on the
part of municipal councillors ("the Giliomee investigation"),
which could have led to the suspension of a number
of councillors,
resulting in a hung council. The Barnard report and Giliomee
investigation had been commissioned before the transfer
of political
control in the council and the appellant's return to work.
32.
The appellant testified that on the day he returned to work at the
Municipality he met with the speaker, the mayor, the chief
whip and
members of the mayoral committee, who briefed him on the status
of municipal affairs. He was told that the whole
of the senior black
management of the municipality had either been suspended, or was
facing suspension, for alleged transgressions,
flowing from the
Barnard report, and that nine or ten councillors were facing
disciplinary proceedings arising out of the Giliomee
investigation.
There was a fear that if these councillors were suspended, there
would be a hung council which could not take any
decisions. The
appellant was also told that Gilomee, had been appointed while the DA
had been in control of the council, and was
believed to be working
for the DA and targeting councillors who were aligned to the ANC with
a view to getting them dismissed.
33.
The appellant stated that he was instructed by the speaker, the mayor
and senior council members to stop Giliomee's investigation,
and
appoint a consultant who could “
independently investigate
without a political motive”
to review the work done by
Barnard and Giliomee and report to council with recommendations as to
who should be suspended, who could
be brought back to work, and who
should be disciplined. According to the appellant this work was
required urgently
"because it
[would]
render the
council incapable of doing its work if
some
people
[were]
suspended and the senior management
[were]
for
a
long
time not at work
so
that we
[could not]
deliver on our
mandate to our communities."
In other words, the problem was
twofold: the absence of many municipal officials from work rendered
the Municipality unable to function,
and the suspension of too many
councillors would render the council hung or inquorate and therefore
dysfunctional.
34.
The appellant further testified that an additional reason was given
by the speaker, mayor and members of the mayoral committee
for the
need to appoint a consultant, namely that the administration of the
municipality was in a chaotic state, that there was
much work to be
done, and that the services of a specialised consultant were required
to assist in putting the municipality's affairs
in order and
implementing service delivery. This was required to be done before
the next local government general elections in
May 2011.
35.
According to the Appellant he was told by the speaker and mayor to
appoint IBR, headed by Kenned, as the consultant. His counsel
also
put it to state witnesses Jordaan and Mostert that the appellant was
instructed by the mayor and the speaker to appoint IBR.
However the
appellant contradicted himself on this point during his
evidence-in-chief when he stated that SALGA (the South African
Local
Government Association) had given him the names of a few consultants
and that he chose IBR in consultation with his senior
management,
including Jordaan, the CFO. Under cross-examination it emerged that
the appellant was introduced to Kenned by the speaker
and the
executive mayor at a meeting held a few days after he returned to
work, and that they discussed what was required of IBR
in that
meeting, including the problems with the Barnard report and the
Giliomee investigation. He also admitted under cross­
examination
that when here turned to work IBR was already involved in advising
the political office-bearers (i.e. the speaker,
the mayor and members
of the executive or mayoral committee)
"on a risk basis".
36.
The appellant's explanation for why he appointed IBR by way of a
deviation instead of following normal procurement procedure
was that
the specialised services of a consultant were required urgently to
bring political and administrative stability to the
Municipality. The
consultant had to have the expertise to deal with labour relations
and disciplinary issues, planning and development,
financial and
legal matters. He considered that the need to
"get the
Municipality right”
within a short period of time, i.e.,
before the next election 8 months away, made it
impractical
to
implement normal procurement processes which, according to the
appellant, took 4 to 5 months.
37.
The appellant conceded in response to a question from the magistrate
that it would have been
possible
to follow normal procurement
processes in appointing the consultant, but stated that the
implementation would then have been for
the new council, since the
elections took place in May 2011.
38.
According to the appellant, if a consultant had not stepped in at
that stage to resolve the problem caused by the inability
of council
to function and address the dysfunction of municipal administration
caused by the suspension of members of top management,
the
Municipality would likely have been placed under administration. As
the appellant explained it,
"if your council can't function
they can't take decisions, they can't deal with the budget, they
can't deal with the integrated
development plan, they can't deal with
the implementation plan of council, they can't render services
properly because there is
no decision making in terms of projects and
the money to be spent on those projects."
39.
The following facts pertaining to the deviation were admitted:
39.1 On 23 August 2010 the speaker
addressed a memorandum to the mayor headed
"Investigations
into Councillors"
in which he disclosed that a number of
urgent matters had been reported to him related to alleged breaches
of the Code of Conduct
for Councillors and requested urgent
assistance from a consultant to investigate these matters.
39.2 On 24 August 2010 the acting
mayor instructed the appellant to provide the necessary assistance to
the speaker. On the same
day Kenned completed an application for
IBR's registration on the Municipality's database as an accredited
service provider, which
was sent to Mr Ladouce, Senior Accountant:
Supply Chain Management ("Ladouce"), on 25 August 2010.
39.3 On 25 August 2010 the speaker
provided the appellant with a written "Brief to Consultant"
which included an instruction
to investigate reported breaches of the
Code of Conduct for Councillors and report within 10 days. Three
matters were listed as
"some
of the allegations that require
urgent investigation",
namely: the irregular collection and
distribution of food parcels by councillors under the guise of an
emergency on or about 11
August 2010; the irregular use of council
property by a councillor during 2010 when he instructed caterers to
deliver food paid
for by the Municipality to a private function; and
the fact that 10 councillors left a council meeting in protest
without permission
from the speaker on 3 and 4 August 2010.
39.4 On 26 August 2010 the appellant
wrote the following to Ladouce regarding the appointment of a
consultant:
"I have perused
correspondence
[16]
from the office of the Speaker.
It appears from the correspondence
that the matter is very urgent of
a
serious and very sensitive
nature and I doubt whether we have internal capacity to deal with the
request. I also get the impression
from the Speaker that he would
like to finalise the matter
as
soon as possible.
Could you please appoint IBR
Consultants from our database on an urgent basis in terms of the SCM
policy and Regulations 36(1)(a)(iv).
[17]
”
40.
The undisputed evidence of Ladouce shows that on 26 August 2010
Ladouce compiled, and the appellant signed and approved, a written

memorandum setting out the motivation for the appointment of IBR by
way of a deviation in terms of s 36 of the SCM Policy ("the

deviation memorandum").
41.
One sees from the deviation memorandum that under the heading
11reasonsfor deviation"
various options are listed with
boxes for ticking the applicable reason(s). Crosses appear in the
boxes next to the categories
"exceptional case and it is
impractical or impossible to follow the official procurement
processes"
and
"specialized service".
IBR
is named as the supplier, and the goods and services are described
simply as
"professional services".
The words
"see
attached quote"
appear in the space provided for the
contract amount. However the quotation referred to is merely a letter
dated 25 August 2010
from Kenned to the appellant setting out IBR's
charges of R 1 000.00 per hour plus accommodation expenses plus
travel at R 2.50
per kilometre. The following statement appears under
the heading
"concise description and reason(s) for the
deviation(s)"
"Due to the specialized nature
and the urgency of the matter
as
well
as
the time
factor in which the process have to be concluded, it would not be
practical to follow the procurement process.”
42.
It is common cause that on the strength of the deviation the
appellant, acting in his capacity as municipal manager, on 24
September 2010 concluded a service level agreement with IBR regarding
the services to be rendered by IBR to the Municipality ("the

SLA"). The following features of the SLA are noteworthy:
42.1 the stipulated commencement date
is 13 August 2010, notwithstanding the fact that the appellant only
approved the deviation
on 26 August 2010;
42.2 the duration of the agreement is
from the commencement date until 30 June 2011 (making it a long term
contract, as defined
in the SCM regulations);
42.3 the deliverables are defined as
"a//
services to be rendered and delivered in terms of this
Agreement",
but the SLA itself does not specify what
services are to be rendered;
42.4 the proposal is defined as
including
"the quotation submitted by the Consultant in
response to the request from the Municipality for the rendering of
specialised
services on an urgent basis including all annexures
thereto·:
whereas the quotation only refers to IBR's rates
and contains no indication of the nature of the services involved or
the estimated
time involved;
42.5 under the heading
"scope
of work"
it is stipulated that:
"4.1 It is agreed that the
Consultant shall execute and provide the deliverables in terms of and
as
set out in the Proposal letter of appointment and upon the
terms and conditions of this Agreement within the contract period
as
well
as
anything in addition or incidental thereto.
4.2
All deliverable
shall be submitted to the Municipal Manager.
4.3
Without limiting the generality of the aforegoing, the Consultant
shall, among other things:
4.3.1 Provide general and specific
advice
to
the Speaker, the Municipal Manager and any
official/politician sanctioned by the Municipal Manager and provide
guidance in all matters
pertaining to the functioning generally and
specifically of the Municipality."
43.
The document referred to in clause 4.1 of the SLA as the
"Proposal
letter of appointment”
could not be found on the
Municipality's electronic filing system and was not produced at the
trial. The appellant claimed that
he drafted the document and that it
referred to all the services which were needed at the time, including
labour relations and
human resources, contraventions by the
Municipality of town and planning legislation, legal matters,
financial delegations, fraud
investigations, as well as the review of
the Barnard report and the Giliomee investigation.
44.
It was common cause that during the period August 2010 to 30 June
2011 IBR performed a number of different services to the
municipality, which related to a variety of subjects and which
required a range of skills, experience and qualifications.
45.
Mr Hendrik Mostert (“Mostert”)a
forensic auditor and
ad hoc
member of the Special
Investigation Unit ("SIU”) appointed in 2011 to conduct an
investigation into the affairs of the
Municipality,
[18]
testified for the State that during the period 30 September 2010 to
28 July 2011, IBR submitted 23 invoices totalling R 2 069 050.00
to
the municipality, comprising professional fees of R 1 819 000.00 for
1819 hours at R 1 000 per hour, travel costs of R 167 850.00
and
accommodation costs of R 74 550.00. His evidence in this regard was
not disputed. It was also common cause that all these services
were
performed on the strength of a single deviation.
46.
Keith Jordaan (“Jordaan"), who occupied the position of
Chief Financial Officer ("CFO") at the Municipality
during
2010 and 2011 while the appellant was the accounting officer,
gave evidence for the State regarding the standard operating

procedures for the appointment of consultants. He testified that the
usual practice was for the Municipality to prepare a project
brief
with a timetable and specific deliverables required to be produced or
provided by the consultant. A request for proposals
would be
advertised in accordance with the SCM Policy, and consultants would
present a tender, proposal or quotation setting out
the methodology
to be followed to meet the deliverables, as well as an estimated time
frame and the estimated hours and costs involved
to complete the
task. The Bid Evaluation Committee would then evaluate the bids
received, whereupon the bid adjudication would
be done in terms of
the SCM Policy.
47.
Ladouce testified for the State regarding the standard operating
procedure involving deviations. He stated that the end user

department within the Municipality is required to provide motivation
for the deviation which is assessed by the SCM department
which, if
it agrees with the deviation, refers it to the CFO for approval, who
then refers it to the Municipal Manager for final
approval. As
regards the deviation in issue, he testified that he was given a
letter by the appellant instructing him to appoint
IBR by way of a
deviation in terms of Regulation 36. He was told by the appellant
that there were urgent, confidential matters
which required
attention, but he was not told what the nature of the services was.
48.
Having regard to the evidence as a whole with particular reference to
the provisions of s 36 of the Municipality's SCM Policy,
it is clear
that the appellant's explanation for the deviation does not pass
muster. Neither does the stated motivation for the
deviation
contained in the deviation memorandum, namely that the specialized
nature and urgency of the matter and the time frame
within which the
work had to be concluded made it impractical to follow the usual
procurement process.
49.
As to the alleged specialized nature of the services, it is plain
that IBR was not chosen because of their supposed expertise
in
municipal affairs. It cannot seriously be suggested that IBR is the
only consultancy offering expertise in matters pertaining
to local
government. This is clear from the appellant's testimony that SALGA
had given him the names of a few individuals who could
assist the
Municipality. Yet it is also clear from the appellant's evidence that
he did not approach or even consider anyone other
than IBR for the
appointment. The reason for this is obvious: IBR, who had already
been advising the political officer-bearers
(and was therefore privy-
and presumably sympathetic - to the agenda of the political
office-bearers), had been introduced to the
appellant by the speaker
and the mayor at a briefing held to discuss municipal issues,
including the problems surrounding the Barnard
report and Giliomee
investigation. IBR was hand-picked by the appellant because the
political office­ bearers wanted IBR and
had instructed him to
appoint it. In truth, it was the political office-bearers who chose
IBR.
50.
As to the alleged urgency of the matter, in the first instance it
seems that the appellant was exaggerating when he testified
that it
would have taken 4 to 5 months to procure the services of a
consultant according to the usual procurement process. Regulation
22
requires that advertisements for competitive bidding be advertised
for at least 14 days before closing date, however the accounting

officer is permitted to stipulate a shorter closing date if the
shorter period can be justified on the basis of urgency or emergency

or any exceptional circumstances where it is impractical or
impossible to follow the official procurement process. There is no

reason why the appellant could not have proceeded by way of an
expedited tender.
51.
Even if one gives the appellant the benefit of the doubt and accepts
that the speaker's brief dated 25 August 2010 to investigate
reported
breaches of the Code of Conduct for Councillors and report within 10
days, was too urgent to be put out to tender, that
does not explain
why the appellant did not make any effort to call for urgent tenders
with an expedited closing date in respect
of all the other services
which IBR was required to perform over a 10 month period at a cost of
over R 2 million. The inescapable
conclusion is that no tenders were
called for because IBR had been specifically chosen by the political-
officer bearers and they
did not want anyone else. This conclusion is
fortified by the fact that the appellant backdated the commencement
date of the SLA
to 13 August 2010, at which time IBR was already
working for the political office bearers “
on risk”
long before the deviation was approved and at a stage when IBR
had not even been registered on the Municipality's database of
approved
service providers.
52.
Secondly as regards the alleged urgency of the services and the time
frame within which they were required to be rendered, it
is clear
that the reason for the urgent time frame was that the political
office-bearers and the appellant wanted the tasks completed
before
the next election. As the appellant testified, the idea was to
get
the Municipality right”
before the next election 8 months
away, and to avoid the Municipality being placed under
administration. However self-imposed
urgency based on political
expedience does not amount to the sort of urgency or exceptional case
contemplated in Regulation 36
which justifies bypassing procurement
requirements. Regulation 36 contemplates real emergencies and
exceptional situations where
it is genuinely impractical or
impossible to follow official procurement processes.
53.
The deviation was a stratagem contrived to justify the appointment of
IBR, the politically pre-selected consultant, for an open-ended
range
of purposes over an extended period without a competitive tender
process. It did not meet the requirements of Regulation
36 and was
therefore invalid. As a result, all the expenditure incurred on IBR
was incurred in contravention of the SCM Policy.
That had the
consequence that the payments to IBR constituted irregular
expenditure as defined in the MFMA, since all expenditure
incurred in
contravention of a municipality's SCM policy, and which has not been
condoned in terms of such policy, amounts to irregular
expenditure.
The SCM Policy unsurprisingly does not contain a provision for
condoning irregular expenditure, and there is no suggestion
that
there was any attempt to condone the irregular expenditure: the
appellant's stance is that there was no irregular expenditure
since
the deviation was valid. Condonation in any event could not lawfully
arise for consideration by the municipal council if
the appellant's
conduct had been deliberate or grossly negligent.
54.
Having concluded that the deviation was invalid and that the
appointment of IBR contravened the requirements of the SCM Policy,

the question which remains is whether the appellant acted
deliberately or in a grossly negligent way, as contemplated ins
173(1)(a)(i)
of the MFMA.
55.
It was clear from the appellant’s testimony that he was aware
that even although the political office-bearers had instructed
him to
appoint IBR,
he
bore the responsibility for the appointment
and was required to act in accordance with the law in that regard.
Yet he bowed to pressure
from the political office­ bearers. He
made no attempt to promote competition and cost-effectiveness in
procuring the consulting
services which IBR was hired to render. He
did not call for quotations from other suitably qualified service
providers. He did
not put out an expedited tender. The SLA was
designedly opaque regarding IBR's mandate, giving the appellant
carte
blanche
to assign any task to IBR.
56.
The circumstances surrounding the appointment of IBR, the manner in
which IBR was appointed and the contents of the SLA represent
such a
marked departure from the requirements of the SCM Policy, and the
purported justification for the deviation· is so
patently
spurious, that the inference is irresistible that the deviation
memorandum was mere ''window dressing" designed to
conceal the
irregular appointment of IBR. No experienced municipal manager, as
the appellant claims to have been, could have honestly
believed that
the deviation was a valid and lawful exercise of the power under
Regulation 36. The appellant could not seriously
have thought that it
was correct and proper to conclude the SLA for open-ended, undefined
services over a period in excess of 10
months on the strength of a
single deviation which was originally motivated by the speaker's
request to conduct an urgent investigation
and report within 10 days.
In all the circumstances the conclusion is inescapable that the
appellant acted in the knowledge that
the deviation was unlawful, and
therefore deliberately contravened the requirements of the SCM
Policy.
Unauthorised
expenditure
57.
The appellant was charged under the second and fifth counts,
inter
alia,
with a failure to prevent irregular, unauthorised and
fruitless and wasteful expenditure. The MFMA separately defines
"irregular
expenditure''. "unauthorised expenditure'1 and
"fruitless and wasteful expenditure". Irregular expenditure
may conceivably
also amount to unauthorised and/or fruitless and
wasteful expenditure. They are different concepts which give rise to
discrete
offences. They should therefore have formed the subject of
separate counts instead of being lumped together under the second and

fifth counts in the charge sheet.
58.
As mentioned the fact that the deviation was invalid means that all
monies paid to IBR amounted to irregular expenditure. It
is necessary
to consider whether the amounts paid to IBR also amounted to
unauthorised and/or fruitless and wasteful expenditure,
because
discrete offences are involved - notwithstanding the fact that they
did not form the subject of separate charges.
59.
It must be stated, for the sake of clarity, that even if the
expenditure on IBR was authorised, that would not alter its character

as irregular expenditure. The difference between irregular and
unauthorised expenditure, simply put, is that irregular expenditure

is unlawful, whereas unauthorised expenditure is expenditure which
has not been budgeted for. The fact that irregular expenditure
has
been authorised in a budget does not "cure" its
irregularity; it has to be condoned as provided for in the MFMA.
60.
In terms of the MFMA any
expenditure incurred otherwise than in terms of an approved budget
and within the limits of the amounts
appropriated for the different
votes in an approved budget amounts to unauthorised expenditure,
subject to specific exceptions
set out in sections 11(1)(b) to 0) of
the MFMA.
[19]
61.
Section 11(1)(c) permits a
municipal manager to defray unforeseeable and unavoidable expenditure
authorised in terms of s 29(1)
of the MFMA. Section 29(1) of the MFMA
provides that the mayor may in emergency or other exceptional
circumstances authorise unforeseeable
and unavoidable expenditure for
which no provision was made in an approved budget. Any such
expenditure must,
inter
alia,
be reported by the
mayor to the municipal council at its next meeting and be
appropriated in terms of an adjustment budget passed
within 60 days
after the expenditure was incurred, failing which the expenditure is
unauthorised.
[20]
62.
The definition of unauthorised expenditure includes overspending of
the total amount appropriated in the municipality's approved
budget
and overspending of the total amount appropriated for a vote in the
approved budget. In terms of section 28(1) of the MFMA,
a
municipality may revise an approved budget through an adjustment
budget. Section 28(2)(c) permits an adjustment budget, within
a
prescribed framework, to authorise unforeseeable and unavoidable
expenditure recommended by the mayor, while s 28(2}(d} permits
an
adjustment budget to authorise the utilisation of projected savings
in one vote towards spending under another vote.
63.
Mostert testified that 15 IBR invoices received after 21 November
2010 totalling some R 1.4 million were paid out of an overspent
vote,
which meant that the payments to IBR amounted to unauthorised
expenditure. He stated that he could find no evidence of what
he
referred to as
"council condonation of the overspend
or
rectification of the votes in terms of the MFMA".
Mostert
was presumably referring in this regard to an adjustment budget. He
did not say whether steps were taken to ascertain whether
or not the
payments made to IBR had been rectified in terms of an adjustment
budget, and if so, what those steps were.
64.
It was put to Mostert in cross-examination that the adjustment of
expenditure was dealt with at a council meeting during January
or
February 2011. Mostert was not in a position to dispute this. The
high watermark of his evidence was that, during his investigation,
he
had not received any documents dealing with an adjustment budget and
had not been informed that there was one. He admitted that
he had not
consulted with and put the question to any of the political
office-bearers or council members prior to compiling his
report. The
evidence indicates that Mostert worked solely off documents provided
to him. No evidence was led as to exactly what
documents were removed
by the SIU from the Municipality and were made available to Mostert.
One therefore cannot infer that there
was no adjustment budget merely
because Mostert did not get to see it.
65.
The appellant was emphatic that an adjustment budget was passed in
January or February 2011. He testified that the overspending
of the
vote in relation to expenditure on IBR was dealt with by agreement
between himself and the mayor in terms of ss 28 and 29
of the MFMA
and rectified in the adjustment budget. During cross-examination he
testified that he discussed the funding of IBR
with the political
office-bearers and that it was agreed that:
"...we
need to fund the
services of IBR out of the professional services fund. And if them is
a shortfall the mayor agreed that in terms
of his powers in terms of
section 29
of
the MFMA he will then go to council in the next
year to fill up their budget."
66.
He further stated that:
"Them was also an agreement
between managers, because it is also directors and myself that can do
virements in terms
of
the virements policy that
we
will
then, if there is
a
shortfall
we
will then fill up the
budgets from there and make proper, proper budget provision in the
adjustment. And if there is any problem
towards year end, June the
virement system will be activated again so that we can then
close
off
the books
so
that there is no deficit."
67
The appellant's testimony that an adjustment budget was passed in
January or February 2011 was corroborated by Ladouce, who confirmed

that an adjustment budget was passed, and was consistent with the
evidence of May Du Plessis, senior accountant for creditors and

salaries ("Du Plessis"), who testified that an adjustment
budget is usually tabled before February each year and that
approval
thereof by council is a mere formality.
68.
The State, which bore the onus of proving the appellant's
guilt in relation to unauthorised expenditure, failed to adduce
evidence
which served to prove beyond doubt that the payments made to
IBR from vote number 100103402186 between 13 January 2011 and 28 July

2011 had not in fact been provided for in an adjustment budget. To
succeed on this score the State would have had to lead the evidence

of a municipal official employed in the budget department who had
first-hand knowledge of whether or not an adjustment budget was

passed in February 2011 and whether it dealt with the monies paid to
IBR. It failed to do so.
69.
There is therefore no evidence to gainsay the appellant's
version that an adjustment budget was passed in early 2011 which made
provision for and rectified what would otherwise have amounted to
unauthorised expenditure on the IBR invoices. His evidence on
this
point is not improbable, and must be accepted.
70.
In the circumstances the
State's claim that R 1.4 million of the payments made to IBR amounted
to unauthorised expenditure is unsubstantiated
by the evidence, and
those parts of the second and fifth count which are based on
unauthorised expenditure cannot be sustained.
Indeed it is mystifying
that the State persisted with its contentions regarding unauthorised
expenditure, given the fact that the
charge sheet itself makes
reference to the rectification of overspending through adjustment
budgets.
[21]
Fruitless
and wasteful expenditure
71.
Fruitless and wasteful expenditure is defined in the MFMA as
expenditure that was made in vain, and would have been avoided had
reasonable care been exercised.
72.
Mostert gave evidence regarding a number of the IBR invoices
with a view to establishing that the payments made to IBR amounted to

fruitless and wasteful expenditure.
73.
He testified that the travel cost charged on invoice number
10/2010/0122 dated 29 October 2010 (at p 587 of the record) was R 13

500.00 for 1 800 km, whereas correct amount in terms of IBR's quote
of R 2.50 per kilometre was R 4 500.00. The error was not corrected

and IBR was overpaid by R 9 000.00, which amounted to fruitless and
wasteful expenditure, payment of which was authorised by the

appellant.
74.
He further testified that the correct total of the three
amounts charged for professional fees, travel cost and accommodation
on
invoice 05/2011/0194 dated 30 May 2011 (at p 644 of the record)
was R 67 350.00 and not R 75 000.00 as charged on the invoice in

question. According to Mostert this meant that IBR was overpaid in an
amount of R 7 650.00. However, if one examines the travel
cost on
this particular invoice, one sees that the travel of 5 400 km at R
2.50 per kilometre was in fact undercharged. The figure
stipulated on
the invoice for travel cost was R 5 850.00, whereas it should have
been R 13 500.00. The sum total of the three figures
was correctly
calculated as R 75 000.00, based on the correct figure for
travel charges, and R 75 000.00 was the amount paid
to IBR. There was
therefore no overpayment in respect of that particular invoice.
75.
Mostert also testified regarding what he described as a
"reasonability calculation"
which he performed on
certain of the travelling costs charged by IBR. He pointed out that
the travelling costs claimed on invoice
number 11/2010/0153 dated 30
November 2010 (at p 594 of the record) amounted to R 18 000 for 7200
km at R 2.50 per km, plus accommodation
costs of R 6 500.00. On 21
November 2010 travel costs of R 6 750.00 for 2700 km had been charged
on invoice number 11/201/00149.
According to Mostert the charge for 7
200 km a mere seven work days after the previous invoice was
excessive because it amounted
to 9 round trips in 7 days back and
forth from Brackenfell, where IBR is based.
76.
He testified in a similar vein in regard to invoice number
04/2011/0171 dated 30 April 2011 (at p 638 of the record) where R 20
250 was charged for 8 100 km, which he said amounted to 10 round
trips from Brackenfell to Oudtshoorn in a month and indicated that
a
vehicle drove to Oudtshoorn and back every second day, whereas
accommodation costs of R 10 400.00 were charged for in addition.
The
intimation was that the travel costs were inflated.
77
The difficulty with Mostert's evidence in this regard is that he is
not in a position to say how many of IBR's staff or team
were working
at the Municipality from time to time, and he fails to take into the
possibility that the travel costs were not only
for one, but for
several people. Indeed the invoice dated 30 April 2011 states in
terms that the charge for 8 100 km was for various
consultants.
78.
It is common cause that it was not only Kenned who attended at the
Municipality on behalf of IBR, but that there were other
persons as
well. The IBR invoices do not provide a breakdown of the travel
costs. Without evidence from the State as to how many
people
travelled to Oudtshoorn, their dates of travel and the duration of
their stay in Oudtshoorn, it is not possible to determine
whether the
travel costs were fair and reasonable or excessive and wasteful,
perhaps even fraudulent.
79.
The State contended in the Court a
quo,
and the magistrate
accepted, that the reports of Barnard and Giliomee were regarded as
unacceptable because of the outcomes and
not because of any problem
with their work, and that the motivation for having the work redone
by IBR was political and not performance-related.
80.
On this basis the magistrate concluded that the cost involved was "a
potential loss or waste of tax payers' money".
This was a
misdirection. In the first instance, IBR was tasked with reviewing
the Barnard and Giliomee reports and providing alternative

recommendations as to how to deal with delinquent councillors and
municipal officials. Given that there was a perception of political

bias in relation to the work done by Barnard and Giliomee, it was not
unreasonable to appoint someone else to review their work
and provide
a second opinion which would carry greater weight and legitimacy in
the council. In the second instance, the review
of the Barnard and
Giliomee reports was only one of many tasks performed by IBR. No
evidence was led by the State to show that
the services rendered by
IBR were unnecessary and/or that value was not received by the
Municipality. Indeed Jordaan conceded that
he could not say that the
work done by IBR was unnecessary and that his issue was with the
irregular manner in which IBR had been
appointed, not the services
they provided.
81.
The high watermark of the State's case in regard to fruitless and
wasteful expenditure is the evidence that there was an overpayment
of
R 9 000.00 in regard to IBR's invoice number 10/2010/0122 dated 29
October 2010. It is clear that the calculation error on the
invoice,
and hence the overpayment could and would have been avoided if the
invoice had been checked properly and reasonable care
exercised. The
overpayment of R 9 000.00 to IBR therefore constitutes fruitless and
wasteful expenditure as defined in the MFMA.
The
first count
82.
The State alleged that the appellant used his position as accounting
officer for personal gain or to improperly benefit Kenned
or IBR, in
contravention of s 61(2)(b) as read with s 173 (1)(a)(i) of the MFMA.
However no evidence whatsoever was adduced to
show that the appellant
received a backhand payment from IBR, or that he profited personally
in any way from the appointment of
IBR.
83.
The evidence of the appellant was clear, and must be accepted in the
absence of any contrary evidence on the point, that he
derived no
gain from the appointment of IBR, that he had no personal interest in
appointing Kenned. Indeed he did not even know
Kenned before he was
introduced to him by the mayor and the speaker a few days after his
return to work.
84.
The magistrate found that the
appellant permitted Kenned and/or IBR to benefit improperly because
IBR subcontracted work to a chartered
accountant, Ms Althea Lapoorta
("Lapoorta"), in connection with an investigation into the
control environment regarding
the daily cash collection process at
the Municipality. Lapoorta charged IBR R 35 000.00 for 35 hours at R
1 000.00 per hour, whereas
IBR charged the Municipality R 95 000.00
for the task. The magistrate accepted that this meant that IBR had
profited improperly
to the tune of R 60 000.00. This was a
misdirection. If one has regard to Lapoorta's affidavit, in which she
states that Kenned
attended five out of seven of the interviews
conducted by her, and ;f one compares Lapoorta's draft reports with
the final report
submitted by IBR to the Municipality,
[22]
it is clear that Kenned and Lapoorta worked on the assignment
together. One cannot infer that Lapoorta did all the work on her
own
and that Kenned did nothing and merely added a surcharge on top of
her bill.
85.
In the absence of any evidence regarding exactly what was done by
Lapoorta and Kenned respectively, the time spent by each,
what would
have been a reasonable number of hours to complete the task and the
average market rate per hour for similar work, the
inference that the
amount of R 95 000.00 charged by IBR was excessive and that IBR
profited improperly cannot be sustained. But
even if the charge was
excessive and IBR's profit improper, there was nothing in the
evidence to prove that that this had been
due to the use by the
appellant of his position to achieve the improper enrichment of IBR.
86.
In the circumstances there is no evidence to substantiate the charge
of contravening s 61(2}(b} and the appellant should not
have been
convicted on the first count.
The
second count
87.
The second count is based on an alleged deliberate or grossly
negligent breach of the requirements of s 62(1) of the MFMA. Section

62(1}(a) to (f) sets out a number of goals and measures which a
municipal manager must take reasonable steps to implement in managing

the financial administration of a municipality. A municipal manager
must take all reasonable steps to ensure,
inter alia,
that the
resources of the municipality are used effectively, that proper
financial records are kept, that the municipality maintains
systems
of financial risk management and control, that unauthorised,
irregular and fruitless and wasteful expenditure is prevented,
and
that the municipality has and implements a proper supply chain
management policy. The general import of s 62(1) is that a municipal

manager must take all reasonable steps to put in place and implement
systems and policies to ensure the proper financial administration
of
a municipality.
88.
It is convenient to commence with sections 62(1)(b) and (c) which
deal with the keeping of financial records and the maintenance
of
systems of financial risk management, control and internal audit
"in
accordance with prescribed norms and standards".
The State
failed to adduce any evidence regarding the prescribed norms and
standards and the manner in which the Municipality's
records and
systems allegedly fell short. It follows that the State failed to
make out a case against the appellant in respect
of a contravention
of sections 62(1)(b) and (c) of the MFMA.
89.
Section 62(1)(a) requires a municipal manager to take all reasonable
steps to ensure that the resources of the municipality
are used
effectively, efficiently and economically. The word "a//"
is significant as it extends the ambit of the obligation
and means
that the section is wide enough to cover single defaults as well as
systemic failures. Section 62(1)(a) is closely related
to s 62(1)(d)
which requires that all reasonable steps be taken to ensure that
unauthorised, irregular or fruitless and wasteful
expenditure and
other losses be prevented. Circumstances amounting to a contravention
of s 62(1)(d) with reference to fruitless
and wasteful expenditure or
losses will usually also amount to a contravention of s 62(1)(a) as
they involve the inefficient use
of resources. Both of these
subsections overlap with s 173 (1)(iii) on which count 5 is based,
which provides that an accounting
officer is guilty of an offence if
he deliberately or grossly negligently fails to take all reasonable
steps to prevent unauthorised,
irregular or fruitless and wasteful
expenditure.
90.
Section 62(1)(f)(iv) requires that an accounting officer take all
reasonable steps to ensure that a municipality has and
implements
,
i.e. carries out or executes, a supply chain management policy in
accordance with chapter 11 of the MFMA.
91.
The conclusion that the appellant deliberately violated the SCP
Policy with regard to the deviation and the SLA has the automatic

consequence that the amounts paid to IBR in terms thereof amount to
irregular expenditure.
92.
The fact that the appellant knowingly relied on an artificial and
invalid deviation to appoint IBR in all the circumstances
referred to
above necessarily means that he failed to take all reasonable steps
to ensure that the Municipality implemented the
SCM Policy, as
required in s 62(1)(f). The SCM Policy was not implemented: it was
deliberately bypassed with knowledge of unlawfulness.
For this reason
alone the appellant is guilty and was correctly convicted on the
second count.
93.
Then there is the overpayment of R 9 000.00 to IBR referred to above,
which amounts to fruitless and wasteful expenditure in
terms of the
MFMA. The question is whether the appellant acted deliberately or
with gross negligence by failing to take all reasonable
steps to
ensure that this fruitless and wasteful expenditure was prevented, as
required by s 173(1)(a)(i) as read with s 62(1)(d)
of the MFMA.
94.
In
Transnet
Ltd t/a Portnet v MV 'Stella Tingas" and Another
[23]
Scott JA described gross
negligence in the following terms:
“
[T]o qualify as gross
negligence the conduct in question, although falling short of dolus
eventualis, must involve
a
departure from the standard of the
reasonable person to such an extent that it may properly be
characterized
as
extreme; it must demonstrate, where there is
found to be conscious risk-taking, a complete obtuseness of mind, or
where there is
no conscious risk-taking, a total failure to take
care. If something less were required, the distinction between
ordinary and gross
negligence would lose its vitality."
95.
It is common cause that the appellant approved the various payments
to IBR, including payment of the invoice containing the
overcharge of
R 9 000.00, by signing the payment requisition form and writing
"approved"
and signing his name on the invoices. The
invoices do not provide a breakdown of the travel and accommodation
costs and very little,
if any, detail of the work done.
96.
According to the appellant the IBR invoices were accompanied by fee
notes which detailed the work done by IBR and the travel
and
accommodation costs. If there were in fact no detailed fee notes
substantiating the charges it would undoubtedly have amounted
to
gross negligence, if not
dolus eventualis,
to approve payment
of the invoices without insisting that IBR provide a detailed
breakdown of the services rendered, the hours spent
on the various
tasks, the number of trips and dates of travel, and particulars of
the accommodation expenses. Without these details,
no one could
properly be satisfied that the charges in the invoices were genuine,
fair, reasonable and in accordance with the SLA.
97
The appellant testified in chief that all IBR invoices and fee notes
were first checked by the head of the department which was
the end
user or beneficiary of the particular service rendered by IBR, who
signed off on the fee notes if he or she was happy that
the services
had been rendered and the charges were correct. The appellant
would discuss the invoice with the head of department,
and if the
head of department was happy with it and had signed off on the fee
notes, he would approve the invoice for payment by
signing on the
invoice and signing the payment requisition form. He repeated his
version during cross­ examination when he
stated that:
"I confirm that each
department received
a
report on whatever matter was dealt with
by IBR in their office. With that report they received
a fee
note. My instruction to everybody, including the consultant, was I
will only sign off on the requisition and the approval of the
invoice
once the
fee
notes are signed off which explains what
was
done, which explains the hours' work, the tariffs charged, the
accommodation charged and signed off by that specific end user. For

my office I did the same. I signed off
on those
issues
[sic
- fee notes],
and it should have been in my office even when I
left or taken away by the SIU.”
98.
The fee notes to which the appellant referred were not produced by
the State at the trial and they were not given to Mostert
together
with the IBR invoices. However one cannot safely draw the inference
beyond a reasonable doubt that the fee notes did not
exist. That is
so, firstly, because Mostert himself did not work through all the
documents in the SIU's possession and merely analysed
those documents
presented to him by the SIU investigators, and secondly, because the
State witness Warren Muller C'Muller'), the
official from the
Municipality who was subpoenaed to hand over all documentation
pertaining to IBR to the SIU investigation, confirmed
that fee notes
existed and were present in the six lever arch files of documents
which he handed over to SIU on 20 May 2011. He
corroborated the
appellant's evidence regarding the existence of fee notes when he
confirmed under cross-examination that:
"In die leer sou daar 'n fooi
lys gewees het wat die end user afgeteken het dat die werk gedoen was
soos
die persoon
se
brief op daardie stadium."
99.
One must therefore accept that there were in fact such fee notes and
that the appellant did not render himself guilty of gross
negligence
by approving payment without a proper breakdown of the work done and
travel expenses charged.
100.
The fact that the fee notes existed, however, is not the end of the
matter. There is still the question of whether the appellant
was
grossly negligent in relation to the overpayment of R 9 000.00. The
gist of the appellant's defence in regard to this overpayment
was
that it was the task of the head of department of the end­user to
check the invoice and ensure that it was in order, and
that his task,
as Municipal Manager, was merely to ensure that the head of
department had verified that the work had been done
and that it was
in order to pay the invoice.
101.
It was clear from the appellant's evidence that he did not personally
scrutinise the charges or check the figures on the IBR
invoices. On
his own version he left this to the relevant head of department. The
question, then, is whether the fact that the
appellant did not
personally check the figures on the IBR Invoices amounts to a
deliberate or grossly negligent failure to take
all reasonable steps
to ensure that fruitless and wasteful expenditure such as the R 9
000.00 overpayment, was prevented, as contemplated
in s 173(1)(a)
read with s 62(1)(d) of the MFMA.
102.
The evidence on this count does not support a charge of deliberate
conduct on the part of the appellant. Nor, to my mind, does
it show
that he was grossly negligent. In the absence of conscious
risk-taking, conduct must evince a total lack of care to qualify
as
gross negligence. It cannot be said that the appellant showed a total
lack of care in regard to the IBR invoices. He put in
place a system
or practice where the head of the department in which the work was
done had to verify that the work had been properly
done and that the
charges were in accordance with what had been agreed. It was not
unreasonable for the appellant to delegate this
task to the heads of
department and rely on their work when approving payment.
103.
Furthermore, there was only one overpayment of R 9 000.00 to IBR out
of some twenty three payments totalling in excess of R
2 million over
a ten month period. This does not show that the payment approval
process place by the appellant was hopelessly inefficient
and
therefore unreasonable; on the contrary, it tends to indicate that
the process was reasonably efficient. Human error is unavoidable:
it
is only when it occurs wholesale that it can perhaps be indicative of
systemic failure which may, in turn, point to gross negligence
on the
part of those charged with putting in place reasonable measures to
guard against human error.
104.
The appellant is accordingly not guilty of a deliberate or grossly
negligently failure to take all reasonable steps to prevent
the
overpayment of R 9 000.00 to IBR, and he should not have been
convicted on this particular ground. As indicated, however, he
was
nevertheless correctly convicted on the second count in relation to
his deliberate failure to take reasonable steps to prevent
the
irregular expenditure arising from the irregular appointment of IBR.
The
third count
105.
In terms of s 65(2){a) of the MFMA the accounting officer of a
municipality must, for purposes of managing the expenditure
of a
municipality, take all reasonable steps to ensure that
"the
municipality has and maintains an effective system of expenditure
control, including procedures for the approval, authorisation,

withdrawal and payment
of
funds".
106.
It is clear from the testimony
of the State witnesses Du Plessis, Lekay and Muller
[24]
that the Municipality did have procedures for the approval,
authorisation, withdrawal and payment of funds. No evidence was lead

by the State to show that these procedures were generally
ineffective.
107.
The only evidence which casts doubt on the efficacy of the
Municipality's expenditure control was that there was an overpayment

of R 9 000.00 on one of IBR's invoices where an inflated travel claim
was not detected.
108.
The evidence shows that the IBR invoices were treated differently and
did not follow the usual payment process described by
Muller because
of the fact that the appellant was the nominal end user while the
services were rendered to different departments.
The IBR invoices
lacked the customary stamps placed on invoices by the finance
department with a place for the signature of the
head of the user
department and of the municipal manager. This suggests that the IBR
invoices did not go through the finance department.
Instead the IBR
invoices were signed only by the appellant, while the relevant head
of department, and the speaker in the case
of services rendered to
the office of the speaker, signed only on fee notes which accompanied
the invoices and were evidently detached
from the invoices.
109.
As stated above in regard to the second count, the overpayment of R 9
000.00 on one IBR invoice came about because the appellant
neglected
to scrutinise the invoice himself and left it to the relevant head of
department to check that the charges on the invoice
were correct.
110.
All the evidence indicates that there was in fact a standard
procedure for the approval of payments which was not applied in

regard to the IBR invoices, where a different process was followed.
111.
There is no evidence that the usual expenditure control system
applied by the Municipality was ineffective, or even that the
payment
approval process followed in respect of the IBR invoices was
ineffective, save for one overpayment of R 9 000.00.
112.
The evidence of a
single overpayment
in these circumstances,
while it does indicate a failure to take reasonable steps to prevent
fruitless and wasteful expenditure
for purposes of the second count,
does not suffice to establish a failure to take steps to ensure that
the Municipality had and
maintained an effective system of
expenditure control for the purposes of the third count. It seems
that s 65(2)(a) contemplates
systemic failure of expenditure control,
which requires proof of more than one erroneous payment in a
relatively small amount.
It follows that the appellant was wrongly
convicted on the third count.
The
fourth count
113.
In terms of s 65(2)(i) a municipal manager is required to take all
reasonable steps to ensure that the municipality's supply
chain
management policy is implemented
in a way
that is fair,
equitable, transparent, competitive and cost­ effective. Section
65(2)(i) must be distinguished from s 62(1)(f),
which requires that a
municipality
has and implements
a supply chain management
policy. The latter provision deals with the
existence and
implementation
of a supply chain management policy whereas the
former deals with the manner in which it is implemented.
114.
This is not a case where the supply chain management policy was in
fact implemented but in a deficient manner which did not
meet the
requirements of fairness, transparency, competitiveness etc. The
evidence shows that the SCM Policy was
not implemented at all
because it was deliberately bypassed and ignored. The deviation was a
sham contrived to conceal the irregular appointment of IBR.
115.
Section 65(2)(i) therefore does not find application on the facts in
this case, and the appellant should not have been convicted
on the
fourth count.
The
fifth count
116.
The conclusion that the appellant deliberately breached the SCM
Policy in regard to the deviation means that all payments made
to IBR
amounted to irregular expenditure under the MFMA. Inasmuch as the
appellant acted deliberately, it follows that he failed
to take all
reasonable steps to prevent irregular expenditure since he failed to
implement the SCM Policy.
117.
In the circumstances he is guilty of contravening s 173(1)(a)(iii) of
the MFMA in respect of the irregular payments to IBR,
and was
correctly convicted on the fifth count.
Sentence
118.
Section 174 of the MFMA stipulates that a person found guilty of an
offence in terms of s 173 may be sentenced to imprisonment
for a
period not exceeding five years or to an appropriate fine. As
mentioned, the magistrate, having convicted the appellant as
charged
on all five counts, took all counts together for purposes of sentence
and sentenced him to five years' imprisonment.
119.
Given that the appeal against conviction has succeeded in respect of
the first, third and fourth counts, it is necessary to
reconsider the
appellant's sentence.
120.
The appellant is guilty of a deliberate failure to implement the SCM
Policy and to prevent resultant irregular expenditure
arising out of
the invalid deviation.
121.
The second and fifth counts overlap inasmuch as they both relate to
irregular expenditure flowing from an unlawful deviation
from the SCM
Policy. It is therefore appropriate to take the second and fifth
counts together for purposes of sentence in order
to avoid an
improper duplication of punishment.
122.
The appellant was born on […] 1956. He was 54 years old at the
time of the commission of the offences and 60 years old
when he was
sentenced by the court a
quo
on 31 March 2017. He is now 62
years old. He is married to a woman employed as a Detective Commander
in the South African Police
Service, has two children who in 2017
were pursuing tertiary education, and resides in Burgersdorp in the
Eastern Cape.
123.
He has Bachelors and Honours degrees in Theology and a Masters degree
in Public Administration. He commenced his municipal
career in the
Drakensberg municipality in 1996 and was employed by various
municipalities between 1996 and 2016 when he was dismissed
from the
Dr Beyers Naude Municipality in Graaff Reinet as a result of his
conviction in this case. He lost his employment which
earned him a
salary of R 66 000.00 per month, and was reduced to a monthly stipend
of R 7 000.00 per month from part-time employment
as a minister in
the Uniting Reformed Church in Burgersdorp. He has no previous
convictions.
124.
The State adduced uncontested evidence in aggravation of sentence
regarding the widespread problem of procurement irregularities
and
irregular expenditure in public institutions. Evidence was lead that
the extent of irregular expenditure in municipalities
is on the
increase. In 2010 the Auditor General reported R 4.14 billion of
irregular expenditure in municipalities. In 2015 the
figure for
irregular municipal expenditure had risen to R 14.75 billion.
125.
Irregular procurement practises lie at the heart of the epic levels
of corruption which is corroding the moral fabric of our
society, not
to mention the financial health of our public institutions. The
importance of procurement in our constitutional democracy
is evident
from the fact that it is dealt with ins 217 of the Constitution,
which requires that organs of state contract for goods
and services
in accordance with a system which is fair, equitable, transparent,
competitive and cost-effective. Strict adherence
to procurement laws
is vital to ensure proper service delivery and a healthy public
purse.
126.
The appellant committed a serious offence by deliberately breaching
the SCM Policy in order to accommodate the wishes of the
political
office-bearers who wanted him to appoint IBR to assist them in
achieving their objectives for the Municipality. Even
more serious is
the fact that the appellant is unrepentant about his conduct. He
insists that he made the right decision in order
to bring about
stability and functionality at the Municipality and to take the
Municipality forward. He says that he would do it
again if faced with
the same choice. This attitude cannot be countenanced. While the
appellant's goals might conceivably have been
laudable, the end does
not justify the means. Officials cannot be permitted to subvert the
law in order to achieve personal ambitions
or political objectives,
however well-intentioned. A strong message needs to be sent that they
will be severely punished if they
do so. For this reason a custodial
sentence must be imposed in this case, and a suspended sentence
coupled with a fine, as contended
for by appellant's counsel, would
be too lenient.
127.
On the other hand it is important to take into account the fact that
the appellant was not actuated by greed. He derived no
financial gain
from the appointment of IBR. Had he done so, the maximum sentence of
five years' imprisonment laid down by the MFMA
would have been
fitting. But he seems to have been genuinely motivated to try and
improve affairs at the Municipality. To this
extent at least his
motives were pure.
128.
It is also important to take into account that the appellant has
already endured significant punishment as a result of his
conviction.
He lost his job and his salary of R 66 000.00 per month. He will not
be able to work as a municipal official for at
least ten years. He
has had to live with the stress of an uncertain future and an
impending prison sentence since he was convicted
in 2016.
129.
All things considered, and having particular regard to the facts that
the appellant did not act out of greed but seemingly
out of the moral
conviction, albeit misguided, that he was doing the right thing for
the good of the Municipality, a sentence of
two years imprisonment
would be appropriate.
Conclusion
130.
In the result the following order is made:
1. The appeal against the conviction
on counts 1, 3 and 4 is upheld and the appellant's conviction on
those counts is set aside.
2. The appeal against the conviction
on counts 2 and 5 is dismissed, and the convictions are confirmed.
3. The sentence of five years'
imprisonment imposed on the appellant is set aside and replaced with
a sentence of two years' imprisonment
in respect of counts 2 and 5
taken together as one for the purpose of sentencing.
_______________________
D.
M. DAVIS
Acting
Judge of the High Court
BINNS-WARD J:
I agree.
_______________________
A.G.
BINNS-WARD
Judge
of the High Court
For
the appellant:
Adv
M Orban
Office
of the Director of Public Prosecutions
For
the respondent:
Adv
J Van der Schyff
Instructed
by Ezechiel Beddy & Associates, George
[1]
Section 173(1)(a)(i) of the Local Government: Municipal Finance
Management Act 56 of 2003 ("the MFMA") provides that:
"173(1) The accounting officer
of a municipality is guilty of an offence if that accounting officer
-
(a) deliberately or in a grossly
negligent way
(i) contravenes or fails to comply
with a provision of section 61(2)(b), 62(1), 63(2)(a) or (c),
64(2)(a) or (d) or 65(2)(a),
(b), (c), (d), (f) or (I).”
[2]
Section 61(2)(b) of the MFMA provides that "An accounting
officer may not use the position or privileges of, or confidential

information obtained as, accounting officer for personal gain or to
improperly benefit another person."
[3]
See note 1.
[4]
Section 62(1) of the MFMA reads as follows in relevant part:
"62(1) The accounting officer of
a municipality is responsible for managing the financial
administration of the municipality,
and must for this purpose take
all reasonable steps to ensure -
(a) that the resources of the
municipality are used effectively, efficiently and economically;
(b) that full and proper records of
the financial affairs of the municipality are kept in accordance
with any prescribed norms
and standards;
(c) that the municipality has and
maintains effective, efficient and transparent systems –
(i) of financial and risk management
and internal control; and
(ii) of internal audit operating in
accordance with any prescribed norms and standards;
(d) that unauthorised, irregular or
fruitless and wasteful expenditure and other losses are prevented;
(e) ...
(f) that the municipality has and
implements -
(iii) …
(iv) a supply chain management policy
in accordance with Chapter 11.”
[5]
See note 1.
[6]
Section 65(2)(a) of the MFMA stipulates that "The accounting
officer must for the purposes of [the management of the expenditure

of the municipality] take all reasonable steps to ensure that the
municipality has and maintains an effective system of expenditure

control, including procedures for the approval, authorisation,
withdrawal and payment of funds."
[7]
See note 1.
[8]
Section 65(2)(i) of the MFMA provides that "The accounting
officer must for the purposes of [the management of the expenditure

of the municipality] take all reasonable steps to ensure that the
municipality's supply chain management policy referred to in
section
111 is implemented in a way that is fair, equitable, transparent,
competitive and cost-effective.”
[9]
Section 173(1)(a)(iii) of the MFMA provides that:
"173(1) The accounting officer
of a municipality is guilty of an offence if that accounting
officer­
(a) deliberately or in a grossly
negligent way
(iii) fails to take all reasonable
steps to prevent unauthorised, irregular or fruitless and wasteful
expenditure.”
[10]
It appears from IBR invoices forming part of the record that IBR was
registered under company registration number 2010/02/0915/23,
which
suggests that IBR was incorporated as a (Pty) Ltd.
[11]
At that time the appellant was the municipal manager of Oudtshoorn
Municipality. He was instrumental in putting the SCM Policy
in
place.
[12]
A 'long term contract' is defined in s 1 of the SCM Regulations to
mean 'a contract with a duration period exceeding one year'
[13]
The MFMA's definition of irregular expenditure includes “expenditure
incurred by s municipality ...in contravention of,
or that is not in
accordance with, a requirement of the supply chain management policy
of the municipality ... and which has
not been condoned in terms of
such policy... , but excludes expenditure by a municipality which
falls within the definition of
'unauthorised expenditure'.”
[14]
In
R v Blom
1939 AD 188
at 202- 203 is was held that:
“
In reasoning by inference
there are two cardinal roles of logic which cannot be ignored: (1)
The inference sought to be drawn
must be consistent with all the
proved facts. If it is not, the inference cannot be drawn. (2) The
proved facts should be such
that they exclude every reasonable
inference from them save the one sought to be drawn. If they do not
exclude other reasonable
inferences, then there must be a doubt
whether the inference sought to be drawn is correct."
[15]
See S v de Jager
1965 (2) SA 612
(A) at 613 C - D; S v Ndweni and
Others
1999 (4) SA 877
(SCA) at 880 D; Tofa v S (20133/14)[2015)
ZASCA 26 (20 March 2015) at para (4).
[16]
The correspondence referred to was the internal memorandum addressed
by the speaker to the mayor dated 23 August 2010 entitled

“Investigation into Councillors referred to in paragraph 39.1.
[17]
It appears that the reference to Regulation 36(1)(a)(iv), which
refers to the acquisition of animals for zoos and game parks,
was
erroneous. The appellant clearly meant Regulation 36(1)(a)(v), which
refers to exceptional cases where it is impractical
or impossible to
follow the official procurement processes.
[18]
The SIU was appointed under Presidential Proclamation No6 of2011 in
terms of s 2(2) of the Special lnvestigating Units and Special

Tribunals Act 74 of 1996, published in Government Gazette No 34001
on 4 February 2011. The genesis of the special investigation
is that
a Mr WP Rabbets, then acting municipal manager of Oudtshoorn, on 9
February 2010 requested the SIU to conduct a preliminary

investigation into serious allegations of fraud involving the
municipality.
[19]
See s 15 of the MFMA read with the definition of unauthorised
expenditure and s 11(3) of the MFMA.
[20]
See s 29 of the MFMA.
[21]
Paragraphs 73 to 75 of the indictment.
[22]
At pp 749 to 797 of the record.
[23]
2003 (2) SA 473
at 480 o 481.
[24]
Du Plessis was the senior accountant dealing with creditors and
salaries, Lekay was a creditors clerk and Muller worked in the
legal
department.