A national trade union has called for criminal prosecution of municipal officials following revelations that municipalities owe R1.7 billion in unpaid pension contributions deducted from workers’ salaries.

The Motor Industry Staff Association (MISA), representing more than 79 000 members in the retail motor industry, has demanded that municipal managers, mayors and councillors be held personally liable for the pension fund shortfall.

Finance minister Enoch Godongwana revealed the R1.7 billion figure earlier this month, confirming that municipalities had deducted pension contributions from employees’ salaries but failed to transfer the money to retirement funds.

Union calls non-payment ‘theft’ and ‘fraud’

MISA chief executive officer: operations Martlé Keyter described the situation as theft. “This is fraud. Workers are being robbed of their retirement security while corrupt officials walk free. Municipal managers and political leaders must face the same consequences as private sector employers. Heads must roll because accountability can no longer be delayed,” Keyter said.

The union’s intervention follows findings by the Financial Sector Conduct Authority (FSCA) that more than 16 000 employers across South Africa have contravened section 13A of the Pension Funds Act, which requires payment of contributions within seven days after the end of each month. Collectively, employers owe R8.3 billion in unpaid pension contributions, with municipalities representing a significant portion of this debt.

Personal liability and criminal penalties under Pension Funds Act

Section 13A of the Pension Funds Act requires employers to pay pension contributions no later than seven days after the end of the month for which they are payable. Failure to comply can result in criminal charges, with penalties including fines of up to R10 million and imprisonment for up to 10 years.

The FSCA has indicated that persistent non-compliance for more than 90 days must be reported to the South African Police Service for criminal investigation. Responsible persons at the employer, including directors or officials managing financial affairs, can be held personally liable.

National Treasury has already moved to intervene, issuing letters to 39 municipalities in 2025 specifically flagging arrears in pension fund, South African Revenue Service and Auditor-General payments. Under section 216(2) of the Constitution, Treasury has the power to withhold equitable share allocations and grants from municipalities that fail to submit credible repayment plans.

The Auditor-General’s 2024-25 report found that 177 municipalities, representing 69% of the total, incurred unauthorised expenditure totalling R36.05 billion in the 2024-25 financial year.

Broader crisis of municipal mismanagement

MISA has called the non-payment of pension contributions a reflection of broader incompetence and corruption that has crippled municipalities. “Pension contributions are not optional, they are a legal and moral obligation. Workers cannot continue to suffer while officials exploit systemic failures for personal gain,” Keyter said.

The union has demanded urgent investigations, prosecutions and consequence management, arguing that protecting workers means protecting the communities they live in.

In the retail motor industry, MISA and the Motor Industry Bargaining Council have already utilised provisions of the Pension Funds Act to enforce personal liability of managing directors, trustees and controlling shareholders to recover unpaid contributions. Approximately 25% of employers in the retail motor industry have faced arrears with provident fund contributions.

Impact on workers’ retirement security

The Motor Industry Retirement Funds, which MISA is a stakeholder in, provides retirement solutions to more than 250 000 members in the retail motor industry, with assets exceeding R40 billion.

The failure of municipalities to pay pension contributions has also prevented affected employees from accessing benefits under the two-pot retirement system, which allows members to access a portion of their retirement savings before retirement.

MISA has called on law enforcement agencies to treat the non-payment of municipal pension contributions as criminal theft and to hold municipal managers and political leaders personally liable.