Treasury Guidelines

National Treasury Guidelines, particularly those issued through Public Finance Management Act (PFMA) Circulars, play a critical role in regulating financial management within South Africa's national and provincial government spheres. These instruments, alongside the more formal Treasury Regulations, provide operational detail and interpretative guidance for accounting officers and authorities. While Treasury Regulations are clearly binding subordinate legislation, the legal status of circulars, instruction notes, and practice notes is more nuanced. This article explores their statutory basis under the PFMA, their practical enforceability, and the implications for compliance, drawing on recent case law that clarifies their legal effect, even if not always formally gazetted as subordinate legislation. Non-compliance continues to pose significant challenges, leading to irregular expenditure and qualified audits across the public sector.

The sound financial management of public funds is a cornerstone of good governance in South Africa, primarily regulated by the Public Finance Management Act (PFMA), No. 1 of 1999. To facilitate the implementation of the PFMA and its accompanying Treasury Regulations, the National Treasury frequently issues various instruments, including circulars, instruction notes, and practice notes. These guidelines are crucial for providing detailed operational directives, clarifying policy positions, and ensuring uniformity in financial practices across national and provincial government departments and public entities.

For legal practitioners advising public sector clients or engaging with government procurement processes, understanding the legal standing and practical implications of these National Treasury guidelines is paramount. While Treasury Regulations are unequivocally binding subordinate legislation, the precise legal force of circulars and similar instruments has often been a subject of debate. This article delves into the statutory framework underpinning these guidelines, examines recent judicial pronouncements that shed light on their enforceability, and highlights the critical compliance challenges faced by accounting officers and authorities.

The Public Finance Management Act, No. 1 of 1999 (PFMA), serves as the foundational legislation for financial management in the national and provincial spheres of government in South Africa. Its primary objective is to regulate financial management, ensuring that all revenue, expenditure, assets, and liabilities of these governments are managed efficiently and effectively. The PFMA places significant responsibilities on accounting officers and authorities to maintain sound financial systems and prevent irregular, fruitless, and wasteful expenditure.

Central to the PFMA's implementation is the role of the National Treasury. Section 76 of the PFMA empowers the National Treasury to make regulations or issue instructions applicable to departments and public entities concerning a range of financial management matters. Pursuant to this power, the National Treasury has promulgated comprehensive Treasury Regulations, which are published in the Government Gazette and hold the status of binding subordinate legislation. Beyond these formal regulations, the National Treasury also issues PFMA Circulars, Practice Notes, and Instruction Notes. These instruments are intended to provide more specific guidance, clarify existing regulations, or address emerging issues, thereby assisting accounting officers and authorities in fulfilling their statutory obligations under the PFMA.

The legal authority of National Treasury instruments varies significantly depending on their form. Treasury Regulations, promulgated under Section 76 of the PFMA, are indisputably binding subordinate legislation, carrying the full force of law. However, the legal status of PFMA Circulars, Instruction Notes, and Practice Notes is more complex. While intended to guide and direct, their binding nature is not always as explicit as that of formal regulations.

According to legal scholarship, for instruction notes and practice notes to have the full 'force of law,' they generally need to be published in the Government Gazette, as required by Section 16 of the Interpretation Act, No. 33 of 1957. In the absence of such publication, they may not be considered legally binding in the strictest sense. However, recent jurisprudence has introduced a critical dimension to this understanding. In *Thru Rainbow (Pty) Limited v National Treasury and Others* (2025), the Gauteng Division of the High Court affirmed that National Treasury's procurement policies, which encompass guidelines, circulars, and instruction notes, have legal effect and must be complied with unless and until they are set aside in judicial review proceedings. This aligns with the *Oudekraal* principle, suggesting that even an unlawful administrative act remains valid until set aside, thereby imparting a *de facto* binding quality to these instruments for organs of state. The Constitutional Court's decision in *AllPay Consolidated Investment Holdings (Pty) Ltd and others v Chief Executive Officer of the South African Social Security Agency and others* (2014) similarly underscored that procurement policies have legal effect and demand compliance.

It is important to note a distinction for local government. The Local Government: Municipal Finance Management Act (MFMA), No. 56 of 2003, in Section 168(3), explicitly states that guidelines issued by the Minister of Finance are not binding on a municipality unless adopted by its council. This contrasts with the national and provincial spheres, where the *Thru Rainbow* judgment implies a stronger, albeit judicially reviewable, legal effect for National Treasury's circulars and instructions. Furthermore, the limits of Treasury's enforcement power were highlighted in *Du Plessis N.O and Another v Minister of Finance and Others* (2024), where the court ruled that National Treasury could not be compelled to direct a department to make payment to a service provider based on a Treasury Instruction and Circular, in the absence of specific legislative provisions granting such enforcement authority. This indicates that while circulars impose obligations, Treasury's power to enforce them directly against other organs of state has statutory limitations.

Despite these nuances in legal standing, non-compliance with PFMA and Treasury directives remains a pervasive issue across the South African public sector. The Auditor-General consistently reports on irregular, fruitless, and wasteful expenditure, often stemming from failures to adhere to supply chain management prescripts and other financial regulations. Accounting officers and authorities bear personal responsibility and face potential financial misconduct liability for such non-compliance. The evolving landscape of public procurement, particularly with the introduction of the Public Procurement Act, No. 28 of 2024, replacing the Preferential Procurement Policy Framework Act (PPPFA), will necessitate new regulations and circulars, further underscoring the dynamic nature of this regulatory environment.

National Treasury Guidelines, particularly PFMA Circulars, are indispensable tools for promoting financial discipline and accountability within South Africa's national and provincial governments. While Treasury Regulations are unequivocally binding subordinate legislation, the legal effect of circulars and instruction notes, though not always formally gazetted, is significant. Jurisprudence indicates that these instruments carry legal weight and must be complied with by organs of state unless successfully challenged and set aside through judicial review. However, the National Treasury's direct enforcement powers regarding these instruments are circumscribed by its statutory mandate.

For legal practitioners, it is crucial to recognise the dual nature of these guidelines: they serve as both practical directives and instruments with considerable legal implications. Advising public sector clients requires a thorough understanding of the PFMA, the Treasury Regulations, and the specific circulars applicable to their operations. Diligent compliance is not merely a matter of best practice but a legal imperative to avoid findings of irregular expenditure, qualified audits, and potential personal liability for accounting officers and authorities. As the public procurement landscape continues to evolve with new legislation, continuous monitoring of National Treasury's pronouncements will be essential to ensure ongoing adherence to the highest standards of public finance management.