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Wasted Bhisho billions leaves little for service delivery

By

Dear MyPE

The Eastern Cape Government has squandered billions of rands over the past few years, which, had it been better spent, could have made a dramatic impact in the lives of the residents of this province.

Despite lip service to cost containment and belt tightening measures, a review of the past three financial years conducted by the Democratic Alliance, has revealed that non-core expenditure remains rampant.

This comes despite the warning in January this year from Minister of Finance, Mr Tito Mboweni, who warned that if the country did not make deep structural economic reforms, then it would be game over for South Africa.

Fast-track to June this year, ahead of the Special COVID-19 Adjustments budget Mr Mboweni said:
“We can no longer spend the way we were spending before. We can no longer do things which we had hoped to do before.”

Despite these two dire warnings, the MEC of Finance will be tabling a special Covid-19 adjustments budget this week that is nothing more than a box ticking exercise, allowing yet another opportunity to rein in spending and redirect funds to where they will make the most difference, to slip through his fingers.

The economy of the Eastern Cape has not been spared the devastating impact that the COVID-19 lockdown has had on world economies.

The Province already has the highest unemployment rate in the country, at 40,5%, and is considered to be the poorest province in South Africa with Gross Domestic Product per capita some 39% lower than that of the national average.

Economists are widely expecting that the Second Quarter GDP figures, which are expected to be announced later this month, will show that our economy has contracted by as much as 8%.

This will not bode well for the Eastern Cape, as the “poorest province in the country.” A massive downturn in economic activity will only lead to more unemployment, more poverty and more hardship for the people of the Eastern Cape.

It makes sense then that government has to do everything in its ability to ensure that the aftermath of the COVID-19 pandemic does not destroy our already fragile economy.

This can be done by ensuring that the province spends its money wisely by eradicating wasteful expenditure and ensuring that every cent of public money is utilised correctly.

I have, over the past year, been monitoring the wasteful expenditure and frivolous non-core service delivery related spending of the province, and have subsequently created the Bhisho Billions Barometer, which we will share with you today..

The Barometer, which will now appear on the screen and will be circulated to all of you, highlights how the province has lost in excess of R11 Billion in wasteful expenditure over the previous three financial years.

Amongst the aforesaid I wish to highlight the following:

  1. An amount of R2,1 Billion has been spend on Infrastructure Budget overruns. This is mostly where infrastructure projects have not been completed on time and where contractors have demanded additional funding to complete projects which have been awarded at a fixed tender price;
  2. Overtime to the tune of R1,93 Billion which has been paid to our departmental officials. The concerning trend here is that 3 years ago our total overtime bill was only R231 million. Last year it was R900 Million- that is an increase of nearly 400% in only three financial years;
  3. Travel and Subsistence of our departmental officials came at a cost R2,58 Billon over a three year period. This includes, as can be seen in IQP 30 Q737 that will be displayed on the screen momentarily, hotel accommodation amounting to R881 million for only two of these financial years.
  4. Medico legal claims paid due to medical malpractice instances for the financial years 2017/18 and 2018/19 came at R1,2 billion. The audited figures for the 2019/20 obviously not yet being available and as such not included in my barometer. What is concerning to note herein is that not a cent has been recovered from any official in relation to any of these claims;
  5. Advisory Business Consultants have raked in R1,4 Billion in fees over a 3 year period. It must be made clear that these consultants are mostly not linked to specific projects and their advisory services are general services being provided to departments.

In the aforementioned calculation I have not included amounts relating to Irregular Expenditure which have been incurred by provincial departments over the three year period because I believe that services were procured for these amounts, albeit in an irregular manner.

What does R11 Billion mean to the average man in the Eastern Cape?

In endeavouring to comprehend this figure it is best illustrated by stating that the amount is roughly equivalent to all the capital infrastructure that has been built by the province over the past three years.

This means that the amount identified in wasteful expenditure could have been utilised to build twice the number of schools, clinics, roads, parks, RDP houses and other capital infrastructure that have been built by the province during this period.

Alternatively, this is equivalent to 90 000 RDP housing top structures, or the creation of an additional 360 000 EPWP jobs for a year at R30,000 per person.

Ladies and Gentleman, we have to stop the wastage.

The Eastern Cape can simply no longer afford to bleed money in this manner given the dire financial circumstances that the country and the economy finds itself in. Wasted public funds equates to wasted opportunities for our province and for our people.

Unfortunately, the new provincial administration, under the leadership of Premier Oscar Mabuyane, that took office last year has done very little in order to stop wasteful expenditure in the province.

His handling of this rampant wasteful expenditure will ultimately be the litmus test of his holding office. As the former MEC Finance, he can make or break this province financially.

Now, more than ever, government as well as our political parties in opposition, must account as to how public money is being spent and utilised to the benefit of the people of South Africa.

We need urgent financial reforms in our approach to public funding if the country, but more specifically, the Eastern Cape Province, is to survive the aftermath of the COVID-19 pandemic.

Unfortunately, the special Adjustments Appropriation that will be tabled and adopted on Thursday offers nothing in the way of financial reforms or even an attempt at redirecting spending away from wasteful expenditure.

I have made it clear before that if our economy is to survive the onslaught of the COVID-19 pandemic, government and private sector must work together in order to find solutions. Whilst the ruling ANC has a dismal track record of being responsive towards the needs of business in the Eastern Cape, failure on the part of the provincial government to listen and provide support to various sectors in the private sector this time around, could proof to be fatal.

Some of the proposals that the Democratic Alliance tabled for consideration in the Adjustments Budget included:

  1. The Establishment of a Tourism Recovery Fund. The Tourism industry has been one of the hardest hit by COVID-19 as a result of international and local travel bans. Investment in tourism could possibly yield very positive results, quickly;
  2. The Establishment of a Provincial SMME COVID Support Fund. Savings within the existing budget of at least R1 Billion should be utilised to support small and medium enterprises who have not benefitted from other support funds from national government;
  3. Additional Budget to be made available and set aside for urgent Drought Relief measures for struggling farmers;
  4. Establishment of a once-off bailout fund for cash strapped municipalities. Assistance could be given to qualifying cash strapped municipalities which are willing to implement a strict financial turnaround plan to be monitored by provincial treasury;
  5. Budget virements to be affected to non-core service delivery related spending in order to prioritise spending on capital infrastructure projects which will get our contractors, but more importantly, the people of the Eastern Cape working again.

Unfortunately, Provincial Treasury has not included any of the aforesaid proposals or that of any other member of the Provincial Finance Committee opting rather to only include changes in conditional grant funding allocations from National Treasury in the Adjustments Budget. As such there will be no additional allocations for support to business, local government or drought stricken farmers, this whilst the province underspent its budget by a whopping R2,364 billion in the first quarter of the financial year.

Together we can fix the Eastern Cape.

The Democratic Alliance will continue to offer credible solutions in order to spearhead fiscal reforms in the province. Now, more than ever, we need all hands on deck in order to put our province and our country first.

Regards

Retief Odendaal, MPL
DA EC Shadow MEC for Finance

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