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PFMA Act, MFMA and ICT procurement: how the public sector buys technology

The PFMA Act (Public Finance Management Act 1 of 1999) governs how national and provincial departments and public entities manage and spend public money; the MFMA (Act 56 of 2003) does the same for municipalities. This guide explains both and how Arke Technologies, in Johannesburg, supplies ICT within their rules.

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PFMA Act, MFMA and ICT procurement: how the public sector buys technology

Last reviewed: September 2026, 20 min read

The PFMA Act (Public Finance Management Act 1 of 1999) governs how national and provincial departments and public entities manage and spend public money; the MFMA (Act 56 of 2003) does the same for municipalities. This guide explains both and how Arke Technologies, in Johannesburg, supplies ICT within their rules.

Last reviewed: September 2026, 20 min read

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What is the PFMA Act?

Last reviewed: September 2026.

PFMA stands for the Public Finance Management Act, Act 1 of 1999. It took effect on 1 April 2000 and was amended in its first year by the Public Finance Management Amendment Act 29 of 1999, so searches for "PFMA Act 29 of 1999" lead to the same law. The PFMA meaning, in one line: whoever spends public money in a national or provincial institution must plan it, control it and account for it.

What is PFMA in South Africa in practice? It covers national and provincial departments, constitutional institutions and the public entities in its schedules: Schedule 1 lists constitutional institutions, Schedule 2 major public entities, and Schedule 3 other national and provincial public entities and government business enterprises. This guide, part of our insights and guides, explains what the PFMA, its regulations and the MFMA mean for anyone buying or supplying technology.

What is the purpose of the PFMA? Section 2 sets it out: transparency, accountability and sound management of the revenue, expenditure, assets and liabilities of the institutions it covers. National Treasury summed up the PFMA principles as modernising financial management, letting managers manage while holding them accountable, providing timely, quality information, and eliminating waste and corruption (National Treasury, Guide for Accounting Officers).

A man reads through paperwork at his desk while a colleague sits opposite.

What is the MFMA?

The MFMA is the Local Government: Municipal Finance Management Act 56 of 2003, in force since 1 July 2004. The MFMA meaning is the PFMA's municipal counterpart: sound and sustainable management of the finances of municipalities and municipal entities, through rules for budgets, supply chain management, reporting and accountability.

What is the MFMA Act in daily terms? The municipal manager is the accounting officer, the mayor steers the budget, the council approves budgets and policies, and the treasuries monitor. Its main regulations cover supply chain management (2005), budgets and reporting (2009), the standard chart of accounts, mSCOA (2014), and minimum competency levels (2007). The last of these explains the "MFMA certificate": finance and supply chain officials must meet prescribed competency levels, usually through an accredited municipal finance programme.

PFMA and MFMA: the difference

The difference between PFMA and MFMA comes down to who spends the money and which procurement rules apply. Both rest on section 217 of the Constitution, which requires public procurement to be fair, equitable, transparent, competitive and cost-effective.

PFMAMFMA
Full namePublic Finance Management Act 1 of 1999Local Government: Municipal Finance Management Act 56 of 2003
In force1 April 20001 July 2004
Applies toNational and provincial departments, constitutional institutions, public entities in Schedules 2 and 3Municipalities and municipal entities
Accountable personThe accounting officer (head of department); the board, as accounting authority, of a public entityThe accounting officer (municipal manager); the chief executive of a municipal entity
Financial year1 April to 31 March1 July to 30 June
Procurement rulesTreasury Regulation 16A and National Treasury SCM instructionsMunicipal Supply Chain Management Regulations and each municipality's SCM policy
Competitive bidding aboveR1 million incl. taxes (departments, constitutional institutions, Schedule 3A and 3C entities)R300,000 (local), R200,000 (district) or R750,000 (metro), incl. VAT
GuidanceTreasury instructions, practice notes and guidelinesMFMA circulars and guidelines
OversightParliament or the provincial legislature, and the Auditor-GeneralThe council, provincial treasury and National Treasury, and the Auditor-General

PFMA summary: the sections ICT buyers meet

A PFMA Act summary for technology buyers comes down to seven parts of the Act:

  • Section 38: the accounting officer's responsibilities. The responsibilities of an accounting officer according to the PFMA include effective, efficient, economical and transparent use of resources; financial and risk management, internal control and internal audit; a procurement and provisioning system that is fair, equitable, transparent, competitive and cost-effective (section 38(1)(a)(iii)); preventing unauthorised, irregular and fruitless and wasteful expenditure; and paying what is owed on time.
  • Section 40: reporting. Annual financial statements to the Auditor-General within two months of year-end, an annual report within five months, and monthly revenue and expenditure reports within 15 days of month-end.
  • Section 44: delegation of authority. Under the PFMA, delegation of authority must be in writing and does not remove the accounting officer's own responsibility; section 56 applies the same rule to accounting authorities.
  • Section 45: other officials. Section 45 of the PFMA Act makes every official responsible, within their own area, for internal control, proper use of resources and preventing irregular expenditure, so the official who signs for an ICT delivery or approves a change in scope is accountable too.
  • Section 51: accounting authorities. Boards of public entities carry duties like those in section 38, including an appropriate procurement system.
  • Section 76: Treasury Regulations and instructions. The power under which National Treasury issues binding rules.
  • Sections 81 to 86: misconduct and offences. Wilful or grossly negligent failure by an accounting officer to comply with sections 38 to 40 is an offence carrying a fine or up to five years' imprisonment (section 86).

PFMA Treasury Regulations and supply chain management

What is the difference between the PFMA and Treasury Regulations? The PFMA is the Act passed by Parliament; the Treasury Regulations, in the edition issued in March 2005, are rules National Treasury makes under section 76; and National Treasury instructions add binding detail, such as thresholds. Practice notes and guidelines explain; the Act, the regulations and the instructions bind.

PFMA supply chain management lives mainly in Treasury Regulation 16A, which requires a system covering demand, acquisition, logistics, disposal, risk and performance. These PFMA SCM regulations and instructions set the rules that touch ICT most often:

  • Bid committees. Treasury Regulation 16A6.2 requires bid specification, bid evaluation and bid adjudication committees for competitive bids.
  • Deviations. Treasury Regulation 16A6.4 allows other means only where competitive bidding is impractical, with reasons recorded and approved. Since 1 April 2022, PFMA SCM Instruction No. 3 of 2021/22 has required deviations above the bidding threshold to be reported to the relevant treasury and the Auditor-General within 14 days.
  • Contract variations. Under the same instruction, a goods or services contract expanded or varied by more than 15% or R15 million, whichever is lower (20% or R20 million for construction), is reported monthly, with reasons, to the relevant treasury and the Auditor-General (National Treasury, October 2025).
  • Other organs of state's contracts. Treasury Regulation 16A6.6 allows participation in another organ of state's competitively arranged contract, with the written approval of that organ of state and the supplier.

The PFMA thresholds, set by PFMA SCM Instruction No. 2 of 2021/22 from 1 August 2021, apply to departments, constitutional institutions and Schedule 3A and 3C public entities:

Value, incl. all taxesProcurement method
Up to R2,000Petty cash, where the institution uses it
Above R2,000 up to R1 millionWritten price quotations: at least three, from different suppliers registered on the Central Supplier Database
Above R1 millionOpen competitive bidding, advertised in the Government Tender Bulletin and on the eTender Publication Portal, with awards published

Institutions may lower these thresholds but not raise them, and no order may be split to avoid one. Major public entities and government business enterprises (Schedules 2, 3B and 3D) buy under their own board-approved policies, which must still meet section 51. Preference points follow the Preferential Procurement Policy Framework Act and its 2022 regulations: 80/20 from R30,000 up to R50 million and 90/10 above, with each organ of state setting its own specific goals.

Irregular expenditure and the PFMA compliance and reporting framework

National Treasury Instruction No. 4 of 2022/2023, the PFMA Compliance and Reporting Framework, was issued in December 2022. It brought the earlier frameworks on irregular and on fruitless and wasteful expenditure, and the guideline on unauthorised expenditure, into one instruction on identifying, assessing and reporting them (National Treasury, December 2022). Municipalities use the MFMA's own definitions and MFMA Circular 68.

TypeMeaning under the PFMAHow an ICT project can cause it
Unauthorised expenditureOverspending a vote or a main division within a vote, or spending not in line with its purposePaying for a system from a budget line voted for something else
Irregular expenditureSpending that contravenes, or is not in line with, applicable legislation, including SCM rulesAn order without the required quotations, a split order, work beyond an expired contract, or a variation made outside the rules
Fruitless and wasteful expenditureSpending made in vain that reasonable care would have avoidedLicences nobody uses, or a site visit wasted because access was never arranged

Irregular expenditure PFMA findings in ICT usually start small: a support contract left running after expiry, licences added to an order without approval, or a quote accepted from a supplier whose tax status was never checked. A contract register, written change control and a Central Supplier Database check before every order prevent most of them.

MFMA sections every ICT buyer should know

  • Section 32: unauthorised, irregular, fruitless and wasteful expenditure. Those who deliberately or negligently incur it are liable; the municipality must recover it unless the council, after a council committee investigates, certifies it irrecoverable; and the accounting officer must report it to the mayor, the MEC for local government and the Auditor-General.
  • Section 33: contracts beyond three years. Public participation and a council resolution come first (see the process below).
  • Section 62: general financial management. The municipal manager must use resources effectively, efficiently and economically, run risk management, internal control and internal audit, prevent irregular expenditure and implement the supply chain management policy.
  • Section 65: expenditure management. Money owing is paid within 30 days of receiving the invoice or statement, unless otherwise prescribed.
  • Section 71: monthly budget statements. To the mayor and the provincial treasury within 10 working days after each month ends.
  • Section 116: contracts and contract management. Contracts are in writing, allow termination for non-performance and are monitored monthly; an amendment needs its reasons tabled in council and public notice first.
  • Section 117: councillors and bids. No councillor may sit on, or observe, a bid committee.
  • Section 171: financial misconduct. Deliberate or negligent contraventions, including permitting irregular expenditure, are financial misconduct by the accounting officer, senior managers or other officials.

The MFMA section 33 process for multi-year ICT contracts

Section 33 of the MFMA catches many ICT deals, because licences, managed services and support are often signed for five years. The MFMA section 33 process:

  1. Test the term

    If the contract creates financial obligations beyond the three years the budget covers, section 33 applies.

  2. Publish at least 60 days before the council meeting

    The municipal manager makes public the draft contract and an information statement summarising the municipality's obligations, and invites the community and other interested persons to comment.

  3. Consult

    Seek the views of National Treasury, the provincial treasury, the national department responsible for local government and, for water, sanitation or electricity services, the responsible national department.

  4. Weigh it

    The council considers each year's obligations, the impact on tariffs and revenue, and the comments received.

  5. Resolve

    The council finds a significant investment or benefit, approves the entire contract exactly as it will be signed, and authorises the municipal manager to sign.

Build the 60 days into the project plan: a multi-year contract signed without them risks becoming irregular expenditure.

MFMA supply chain management regulations

The Municipal Supply Chain Management Regulations (Government Notice 868 of 30 May 2005, amended in January 2017 and on 14 December 2023) are the SCM regulations of the MFMA, and every municipal supply chain management policy must give effect to them. The December 2023 amendment raised the thresholds and removed the old category of written or verbal quotations:

MunicipalityFormal written price quotations, incl. VATCompetitive bidding, incl. VAT
Local municipalityOver R2,000 up to R300,000Above R300,000
District municipalityOver R2,000 up to R200,000Above R200,000
Metropolitan municipalityOver R2,000 up to R750,000Above R750,000

Source: National Treasury, Government Notice 4198, 14 December 2023.

Petty cash still covers purchases up to R2,000; formal written price quotations above R30,000 are also advertised for at least seven days on the municipality's website and notice board; and consultancy services, including IT consulting, go to competitive bid when they exceed the threshold or run longer than a year. The MFMA regulations on supply chain management also set out:

  • The committee system. Bid specification, bid evaluation and bid adjudication committees (regulations 26 to 29), with councillors excluded.
  • Regulation 32 of the MFMA. A municipality may buy under another organ of state's competitively secured contract if it has no reason to doubt the contract was validly procured, gains demonstrable discounts or benefits, and that organ of state and the supplier consent in writing.
  • Regulation 36 of the MFMA. Deviations are allowed in an emergency, where only one provider can supply, and where the official process is impractical or impossible, with the reasons recorded and reported to the council at its next meeting; purely technical minor breaches may be ratified.

National Treasury MFMA circulars that matter for ICT

National Treasury MFMA circulars guide municipalities on applying the Act, and a budget circular follows each year. They are published on National Treasury's MFMA website; an old printed MFMA booklet will not show later changes, such as the December 2023 thresholds. These are the MFMA circulars that ICT buyers and suppliers meet most:

CircularIssuedSubjectWhy it matters for ICT
MFMA Circular 13January 2005Service delivery and budget implementation plan (SDBIP)An ICT project needs an SDBIP line with measurable targets
MFMA Circular 62August 2012Supply chain management: enhancing compliance and accountabilityDemand management and procurement plans; variations limited to 15% of the original value for goods and services, 20% for construction
MFMA Circular 63September 2012Annual report updateHow performance, including ICT performance, is reported
MFMA Circular 65November 2012Internal audit and audit committeeIT audit and the audit committee's oversight
MFMA Circular 68May 2013Unauthorised, irregular, fruitless and wasteful expenditureHow these are identified, investigated, recorded and reported
MFMA Circular 71January 2014Financial ratios and normsThe norms that spending is measured against
MFMA Circular 80March 2016Financial systems and processes for mSCOAMinimum requirements for municipal financial systems
MFMA Circular 88For the 2018/19 budget cycleRationalised planning and reporting indicatorsThe indicators that systems must report on
MFMA Circular 90January 2018Tax compliance statusBidders' tax status is verified through the Central Supplier Database
MFMA Circular 106September 2020Framework for infrastructure delivery and procurement managementPlanning and procurement gates for infrastructure projects

Source: National Treasury MFMA circulars. Circulars interpret and guide; the Act and its regulations bind.

The PFMA budget process and the MFMA calendar

The PFMA budget process runs on a 1 April to 31 March year. Departments plan within the Medium-Term Expenditure Framework, the national budget is normally tabled in February and passed as an Appropriation Act, and an adjustments budget follows later in the year. Technology spending that is not in the budget and the annual performance plan cannot simply be added part-way through the year.

The MFMA calendar runs from 1 July to 30 June and sets the deadlines municipal ICT plans must fit:

WhenWhat happensMFMA section
By 31 AugustThe mayor tables the budget timetable, at least 10 months before the budget year; annual financial statements go to the Auditor-General21 and 126
Every monthBudget statement to the mayor and provincial treasury within 10 working days71
By 25 JanuaryMid-year budget and performance assessment72
By 31 JanuaryAnnual report tabled in council, within seven months of year-end127
By 31 MarchAnnual budget tabled, at least 90 days before the year starts16
By 31 MayCouncil considers the budget, at least 30 days before the year starts, and approves it before 1 July16 and 24
Within 28 days of approvalThe mayor approves the SDBIP53

How ICT procurement works under the PFMA and MFMA

  1. Plan the need

    Start with the problem, the users and the full cost over the term: hardware, licences, support, security and exit.

  2. Budget it

    Put it in the budget and the annual performance plan or SDBIP; in a municipality, check whether section 33 applies.

  3. Specify outcomes

    Include security, POPIA and service levels, and avoid naming brands unless it is unavoidable.

  4. Choose the route

    Quotations or a competitive bid, by value; another organ of state's contract; or, for national and provincial departments, the State Information Technology Agency where its rules apply (see SITA and government IT).

  5. Verify suppliers

    Central Supplier Database registration, tax compliance status, restriction lists and declarations of interest (see our CSD registration guide).

  6. Evaluate, adjudicate and award

    Functionality where the bid sets it, then price and preference; the bid adjudication committee or delegated official decides, and the award is published.

  7. Contract and manage

    A written contract and service-level agreement, monthly performance monitoring and written change control.

  8. Pay and report

    Pay valid invoices within 30 days, report monthly and keep the records the Auditor-General will ask for.

The Public Procurement Act: what changes, and when

The Public Procurement Act 28 of 2024 was published on 23 July 2024 but is not yet in force. It starts on a date the President proclaims, and the Act allows different dates for different kinds of institution. National Treasury published draft General Public Procurement Regulations, 2026 for comment on 16 April 2026 and extended the comment period to 15 July 2026 (SAnews, June 2026).

Once in force, the Act will create a single framework for procurement by all organs of state. Until then, the PFMA, the MFMA, the Preferential Procurement Policy Framework Act and their regulations, instructions and circulars apply, so procurement officers should work to the current rules while preparing for the new ones.

Do the PFMA and MFMA apply to schools?

Public schools are not PFMA institutions. Under the South African Schools Act, a school governing body manages the school fund, adopts an annual budget and has its financial statements audited or examined every year. Provincial education departments are PFMA departments, so technology they buy for schools follows PFMA rules, and a school spending its own funds is wise to keep quotations, approvals and records to the same standard. See IT for schools and education.

How Arke works with PFMA and MFMA buyers

  • Procurement documents. Arke Technologies (Pty) Ltd is a Level 1 B-BBEE contributor, giving buyers 135% procurement recognition (sworn affidavit available on request). Company documents, a bank confirmation letter, our CSD supplier number and SARS tax compliance status are available on request, and we complete SBD or MBD forms when a bid requires them; see supplier compliance for the public sector.
  • Costs you can budget. Managed services are priced per user per month after an assessment, and project work is quoted per project, so each cost maps to a budget line and a financial year; our guide to managed IT services costs in South Africa shows the published market ranges.
  • Change control. Every change to the contracted scope is approved in writing before the work is done, so your supply chain unit can test each variation against the limits in PFMA SCM Instruction No. 3 of 2021/22 or MFMA Circular 62 before it happens.
  • Service levels and reporting. Incidents are prioritised on a P1 to P4 scale, with response and resolution targets agreed in your SLA, and every client gets a monthly service review and report it can table at its ICT steering or audit committee, the oversight King IV Principle 12 asks for.
  • Audit-ready records. Every ticket, approved change and remote session is logged, so the evidence the Auditor-General asks for already exists; security controls are aligned with ISO/IEC 27001 and POPIA.
  • Continuity. You own your data, credentials and documentation, and handover at the end of the contract is planned from the start.

We deliver managed IT, cybersecurity, software, systems integration, cloud and data for government and the public sector, including municipalities, with hardware through Server Hub and connectivity through Fibre Boyz: one contract, one accountable team.

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Frequently asked questions

What does PFMA stand for, and what is its purpose? Show answer

PFMA stands for the Public Finance Management Act, Act 1 of 1999, in force since 1 April 2000. Its purpose, set out in section 2, is transparency, accountability and sound management of the revenue, expenditure, assets and liabilities of national and provincial departments, constitutional institutions and public entities, with accounting officers answerable for each.

What is the MFMA? Show answer

The MFMA is the Local Government: Municipal Finance Management Act 56 of 2003, which governs the finances of municipalities and municipal entities. In force since 1 July 2004, it sets rules for budgets, supply chain management, reporting and accountability, and makes the municipal manager the accounting officer, supported by regulations and National Treasury's MFMA circulars.

What is the difference between the PFMA and the MFMA? Show answer

The PFMA governs national and provincial departments, constitutional institutions and public entities; the MFMA governs municipalities and municipal entities. Both require fair and competitive procurement, but they use different regulations, financial years and thresholds: competitive bidding starts above R1 million under the PFMA, and above R200,000 to R750,000 under the MFMA, depending on the municipality.

What does section 38 of the PFMA require? Show answer

Section 38 of the PFMA sets the accounting officer's general responsibilities: effective, efficient, economical and transparent use of resources; financial and risk management, internal control and internal audit; a procurement system that is fair, equitable, transparent, competitive and cost-effective; preventing unauthorised, irregular and fruitless and wasteful expenditure; and paying what is owed on time.

What is the difference between the PFMA and Treasury Regulations? Show answer

The PFMA is the Act passed by Parliament; the Treasury Regulations are rules National Treasury issues under section 76 of the Act, in the edition issued in March 2005. The regulations add detail, such as the supply chain rules in Treasury Regulation 16A, and National Treasury instructions add further binding detail, such as procurement thresholds.

What is irregular expenditure under the PFMA? Show answer

Irregular expenditure is spending that contravenes, or is not in line with, applicable legislation, including supply chain rules. It need not involve fraud: an order without the required quotations, a split order or work beyond an expired contract all count. National Treasury's PFMA Compliance and Reporting Framework sets out how institutions identify, assess and report it.

What does section 33 of the MFMA require? Show answer

Section 33 of the MFMA governs contracts with financial obligations beyond the three years of a municipality's budget. At least 60 days before the council meeting, the municipal manager publishes the draft contract and an information statement, invites public comment and consults National Treasury and the provincial treasury; the council then approves the whole contract by resolution.

What are the MFMA procurement thresholds? Show answer

Since 14 December 2023, formal written price quotations cover purchases above R2,000 up to R300,000 in a local municipality, R200,000 in a district municipality and R750,000 in a metro, including VAT. Above those values competitive bidding applies, and quotations above R30,000 are also advertised for at least seven days.

Buying ICT under the PFMA or MFMA?

Send us your specification or bid reference, and we will respond with a scoped proposal and the documents your process requires. Talk to us about public-sector IT, or call 010 447 2445.

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