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Failing ANC’s R100 billion irregular, fruitless and wasteful expenditure could fund job-seekers

The total balance of irregular, fruitless and wasteful expenditure by ANC national departments and state entities has increased to R100.9 billion.

This is a staggering sum of money. To put it in perspective, the R100.9 billion that was wasted would be enough to provide a jobseeker grant of R875 a month to every single unemployed person. Or a once-off cash grant of R10 500 for each unemployed person in the country. That is not to say the money could or should be used for these purposes. But it does put in perspective the scale of the loss, to consider how this sum could have improved the lives of all 10 million unemployed people.

The R4.1 billion that was lost to fruitless and wasteful expenditure in 2017/8 is enough to fund the salaries of over 22 000 police officers or 21 000 nurses.

It should be a national scandal that wanton waste on this scale has been allowed to take place by this failed ANC government.

Earlier this month, the DA analysed the annual reports of national departments and selected entities that had been tabled in Parliament. This revealed irregular expenditure of R72.6 billion and fruitless and wasteful expenditure of another R3 billion. However, serial mismanagement offenders SAA, SA Express and Denel had not tabled their reports at the time. The DA cautioned that the total was likely to increase substantially.

Prasa has now tabled their annual report, and the financial results are truly shocking:

  • Irregular expenditure: R24.2 billion
  • Fruitless and wasteful expenditure: R1 billion
  • Net loss for the year: R925 million

The Auditor-General (A-G) issued the entity with a qualified audit opinion, due to the large amount of dodgy spending, and the unclear accounting of passenger fares. Despite spending all this money, the entity achieved only 21% of its performance targets.

Prasa also joins the list of departments and entities that the A-G has expressed serious uncertainty over their ability to remain a going concern. There are now eight entities and one department at risk of financial collapse, in addition to the commercially insolvent SABC.

There is no excuse for this massive maladministration, particularly in fruitless and wasteful spending – this money is spent with absolutely no gain for the public. The ANC continues to pour vast sums of money down the drain at State-Owned Enterprises (SOEs).

Prasa’s results are a slap in the face to all those commuters who queue for hours attempting to catch trains that never arrive. With fuel prices sky-rocketing and 9.6 million unemployed, the neglect of the train system that provides vital links to jobs clearly shows that the ANC does not care about the daily struggles of South Africans.

The DA has shown that whenever we take over failing ANC governments, we clean up the administration and improve service delivery. South Africans have an opportunity in 2019 to choose a party that stands for One South Africa for All – not just the cronies of the ANC elite.

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Only the DA can grow the economy for all

The following remarks were delivered by the Leader of the Democratic Alliance, Mmusi Maimane, during an urgent debate on ways to mitigate the economic recession in Parliament today. 

Honourable Members,

The choice we face as a country is simple: Which world do we want to live in?

Because these are two options available to us: One is the world of the ANC, and the other is the world of the DA. Each of these choices will lead us towards a distinct future.

Economists have described the ANC’s world as a pre-1990 universe. A world in which the Berlin Wall is yet to come down.

In their world, the State is everything, and must do everything.

In their world, SOE’s – no matter how badly run – are the answer.

In their world, citizens can’t be trusted to control their own destiny or own their own land. The state knows what’s best for you.

In the other world – that of the DA and many others who share our view – people hold the power over their own lives.

In our world, citizens have agency. They can own their land, run their businesses, build their wealth.

In our world, more often than not, the state must get out of the way of enterprise and progress.

Our world is one of inclusion and growth.

This is the choice we face, Honourable Members, as we contemplate the reality of a country in deep, deep crisis.

I’m not going to waste your time telling you about the extent of our economic distress. We all know this.

9.6 million people cannot find work.

Real per capita income has been dropping for the past five years.

Our national debt has ballooned to R3 trillion.

And we now face the threat of a further sovereign rating downgrade.

Anyone still denying that South Africa is in the midst of a severe economic crisis has no business standing up here on this podium today debating solutions.

Parliament should ask why we find ourselves here, and what we should do to fix it.

One analyst described our situation this week as “death by a thousand cuts”, referring to the many factors that came together to paralyse our growth and bleed our fiscus dry. And this is largely true.

Yes, corruption has cost us dearly. As much as R100 billion, according to some estimates.

Yes, the crisis at SARS has led to a huge under-collection of around R50 billion.

Yes, the never-ending bailouts of our poorly-run State-Owned Enterprises continue to divert tens of billions of Rands away from other crucial budget items each year.

Yes, our ever-expanding public sector wage bill along with our massive cabinet place a drain on our fiscus that we simply cannot afford.

Yes, populist policies such as Expropriation Without Compensation, the nationalisation of the Reserve Bank and the proposed NHI are a recipe for economic disaster.

All of these things played a part in bringing our economy to its knees.

But they pale in comparison to the biggest cause of them all – the economic elephant in the room that still goes unmentioned in so much of the analysis.

What lies at the very heart of our country’s crisis is the ANC.

The fact is this: The ANC doesn’t accept responsibility for causing this recession, and it has no plan to get us out of recession.

This administration is only seven months old, but it is already stumbling around in the dark looking for excuses, instead of facing up to hard truths.

There is no plan. There is no firm direction.

You can come here today and attack the DA’s plan to rescue the economy, but we have a plan. And where we govern, this plan is working.

In Johannesburg, the government of Mayor Mashaba has already attracted more than R6 billion in investment since taking over in 2016.

In Tshwane, Mayor Msimanga’s government has tripled investment in the metro.

75% of new jobs added in the past year were created in the DA-run Western Cape.

Honourable Members,

We all know that South Africa has a big problem. And it is a problem that won’t be solved with a stimulus package or an investment conference.

The root of our problem is an ANC that has no shared, positive vision for our future, never mind the ability to lead us there.

We have already been left behind by the rest of the world – and indeed by our African neighbours.

While the rest of the world surges forward with innovative and dynamic economies, we are retreating back to a time of state-led economies.

While the rest of the world embraces inclusive economic growth as the instrument to lift people out of poverty, we can’t look beyond redistributing what’s already there.

Our government is so obsessed with control, it cannot see how it is suffocating enterprise and strangling small business.

It honestly believes that every state failure just needs another state programme to fix it.

You cannot grow like this. This has to change.

Stop blaming the Global Financial Crisis. That was ten years ago. The world has moved on.

Stop blaming Jacob Zuma, as is fashionable these days. Jacob Zuma didn’t cause this mess, he only exploited it because he was allowed to.

The blame lies squarely at the feet of the failed ANC, collectively.

And if the ANC government can’t swap its outdated worldview for one better suited to the 21st century, then we must swap the ANC government for one that can take this country forward. That is the DA.

I know our country is ready to become part of a dynamic global economy. Just this morning I visited a business incubation and training centre in Delft, and what I saw there was inspiring.

We certainly don’t lack motivated people with ideas.

Honourable Members,

If there is real commitment to “picking up” the Rand and turning the economy to growth, then it is time for real choices. Hard but necessary choices that will restore investor confidence and get us out of the red.

Number One: We must cut loose the SOE’s that are dragging us under. This means the privatisation – or at least part-privatisation – of South African Airways, and splitting Eskom into two separate businesses, one for power production and one for power distribution.

Number Two: We must put an end to the stifling Eskom monopoly by allowing cities to purchase electricity directly from independent power producers.

Number Three: We have to curb spending and stabilise our national debt at 50% of GDP by introducing a fiscal austerity package. All revenue shortfalls must be covered by cutting waste, and not by increasing taxes.

Number Four: We must trim our Cabinet by more than half. Our massive executive with its double ministers for each portfolio is a direct result of patronage politics. We simply can’t afford this.

Number Five: We must exempt small businesses from complying with unworkable labour legislation. Those employing less than 250 people must be given every chance of success, and the only labour laws they should have to adhere to are the Basic Conditions of Employment.

Number Six: Immediately settle all budgeted-for invoices that are owed to small businesses by National and Provincial governments. This alone will add a R28 billion boost to the SMME sector.

And Seven: Scrap the reckless populist policies that are destroying investor confidence in our country and have sent business confidence to an all-time low.

Abandon your irresponsible and reckless plunge towards Expropriation Without Compensation. Let’s reform the land and keep our Constitution intact.

This doesn’t mean land reform and restitution must be delayed. On the contrary, it must be sped up, and it must involve the transfer of full title. But this cannot be done at the expense of property rights and the rule of law.

Stand up for the independence of the Reserve Bank, instead of trying to nationalise it. Protect and defend our excellent Governor; stop undermining him.

If we can implement these changes right away, we can undo much of the damage caused over the past decade.

What we can’t do is sit back and watch our growth stagnate for another quarter, and then another.

Because poor South Africans cannot withstand this. Their “real” household income cannot shrink any further – life is already barely affordable.

Now is the time to make some hard choices. Not easy choices like taking on more loans or hiking VAT. Hard choices about the world we want to live in.

And this means choosing either the unity of the ANC or the prosperity of South Africa. We can’t have both.

Thank you.

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The DA’s plan to get SA growing

The following statement was delivered by the Leader of the Democratic Alliance, Mmusi Maimane, at a press conference in Johannesburg today. Maimane was joined by DA National Spokesperson, Refiloe Nt’sekhe.

This week, Statistics South Africa confirmed that we are in recession. This news came as a surprise only to foreign ForEx and bond investors, and it would seem, to our government.

This is no surprise at all to anyone living in South Africa. The truth is that South Africans have known this for months – they have felt it in their own homes as the struggle to make ends meet gets more difficult, they have heard it as the word spreads about more job losses every day, and they’ve seen it in the streets and in the shops and in their pockets.

There is little that needs to be said about the cause of this recession. It is beyond debate. The President and the government’s confused spin cannot discount the facts:

  • This is our first recession since 2009. It was thought that we had entered recession in 2017, but this turned out to have not been so.
  • This is the fifth consecutive year that we have been in recession on a per-capita basis. This means, simply, South Africans have been getting poorer and poorer each year.
  • Of the world’s largest economies, South Africa is now the weakest, and is the only one in recession.
  • Africa is growing at around 3%, with growth in Ethiopia, Cote d’Ivoire, Senegal and Rwanda above 7%.

This is not a recession borne of global economic conditions. This is a home-grown recession, borne of economic mismanagement and bad policy. There are two main contributing factors to this recession, both at root attributable to economic mismanagement and bad policy.

Firstly, South Africans are feeling poorer, and are poorer: Household spending makes the largest single contribution to GDP, but five consecutive years of real per capita negative growth has left South Africans with less to spend each month. In turn, government has also taken more cash from every pocket. Petrol tax increases, VAT increase, sugar tax, income tax increases – all of these decisions punish the poor and middle class and take more money away from hard working families. All of this extra money is demanded by an inefficient, corrupt and captured state, and is not spent on productive investment.

Secondly, investors are feeling skeptical: Global investment is just that, global. It does not owe loyalty to South Africa. It requires certainty of policy. And it requires certainty of the rule of law, and of basic protection of property rights. All of these non-negotiable elements are in question in South Africa. This will make investors second-guess our country as a destination for safe and profitable investment and will make them look elsewhere.

We are now only beginning to see the consequences of this economic mismanagement. There are currently 9.6 million unemployed South Africans, the highest number ever. And the Rand has “blown out”, which leads to higher inflation, and even lower growth.

In response to this recession, the government has been flailing. They are confused, and it shows. Now is not the time for confusion. Now is the time for a decisive agenda for reform to get South Africa growing.

We know that our economy can get growing if we do the following seven things right now:

  1. Scrap reckless economic policies like the proposed nationalisation of the Reserve Bank and the undermining of property rights through expropriation without compensation.
  2. Announce the privatisation, or part privatisation of SAA, and the split of Eskom into separate power production and distribution businesses.
  3. End Eskom’s monopoly and allow cities to purchase directly from independent power producers, increasing competition and lowering costs.
  4. Introduce a fiscal austerity package to contain current spending and stabilise national debt at 50% of GDP. Commit to funding any further revenue shortfalls by cutting wasteful expenditure, not through new taxes.
  5. Cut the size of the Cabinet to around 15 ministries.
  6. Exempt small businesses employing fewer than 250 employees from complying with restrictive labour legislation, other than the basic conditions of employment.
  7. Immediately pay all outstanding invoices owed to small businesses from National and Provincial Governments, amounting to a fiscal stimulus for small businesses of R 20.7 billion and R 7.1 billion respectively.

These seven interventions represent more than just a policy shock to get the economy’s heart beating again. They represent a change in approach from the belief that more state intervention is the only antidote to the failure of previous state intervention. Instead, we pursue a lean, capable state that creates conditions that promote investment in a broadly open, competitive, market-driven economy.

In this, no change is more urgent than our failing SOEs. These SOEs pose an existential financial risk to our country. They are bottomless pits into which billions of rands of public money is poured never to be seen again, on top of the higher prices the public must pay for often-shoddy services.

Privatising, or part-privatising our SOEs will introduce competition in key industries like power production, and transport. This will very quickly reduce the cost of these goods, which alone will be a major growth boost to our economy.

We believe that this change alone would increase private sector investment and economic growth by as much as 3%.
Our plan then emphasizes making it easier for entrepreneurs and small business owners to succeed. Growing the small business sector is the only route to job creation on a massive scale. We must remove the constraints on entrepreneurs by simplifying regulations where possible and by exempting them from restrictive labour legislation.

Despite many constraints imposed by national government, the DA has shown that where we govern we can grow the economy and create jobs. Three quarters of all jobs created in the past year were created in the DA-governed Western Cape, despite a crippling drought. That amounts to 123 000 new jobs created, while during that same period 124 000 jobs were destroyed in Gauteng, the country’s biggest provincial economy.

This has been made possible by deliberate interventions aimed at creating a conducive environment for investment, competition, and economic growth. Cutting corruption and breaking down barriers to entry has seen direct investment triple in the City of Tshwane over the past 24 months. Despite a devastating drought, the Western Cape achieved R2.7 billion in investment in the past financial year, and innovation in the energy sector – through a provincial government “gamechanger” – has stimulated new industries and lowered operating costs for businesses.

The City of Johannesburg has attracted over R6 billion in investment into the country’s economic capital, increasing employment by 109 000 since the beginning of 2018. Johannesburg has also focused on stimulating collaborative growth through calls for private sector investment in city’s inner-city rejuvenation project.

The DA has a plan to get the economy growing. A healthy, growing economy will be able to collect the taxes required to fund better education and healthcare systems, a compassionate welfare programme, effective land reform and restitution programmes, and an effective police service, trained, resourced and equipped to be able to maintain law and order and keep people safe.

Without growth, revenues slide and none of this is possible. Jobs disappear, investors flee, poverty grows. It is then that the soil is most fertile for the simplistic promises of populist demagogues.

That is why we cannot afford to let this recession persist. We must take these seven bold steps now to get South Africa growing again.

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From State Capture to State Collapse: The Legacy of a Failed ANC

The following remarks were delivered by Chief Whip of the Democratic Alliance, John Steenhuisen MP, the DA Shadow Minister of Public Enterprises, Natasha Mazzone MP, and the DA Shadow Minister of Social Development, Bridget Masango MP, at a press conference in Cape Town today.

State Capture has been the defining feature of the ANC government for the past decade. While the DA welcomes that the work the Judicial Commission of Inquiry into State Capture, led by Deputy Chief Justice Raymond Zondo, has now begun, it is important to confront its legacy.

From the appointment and protection of corrupt or unqualified individuals, the purging and threatening of whistle-blowers and dedicated state employees, the unabated looting of public funds, the ANC’s mismanagement has gutted the State. What is worse, the ANC has forced South Africans to carry the cost.

Not only has the ANC allowed State Capture to thrive but they have reached into the pockets of every South African to pay for it, indirectly through bailouts and guarantees, and directly through the recent VAT increase, the successive fuel increases. Life is harder and more expensive for citizens.

Essentially State Capture has led to the very real reality of State Collapse which we are now left with. This collapsed state is not just about the billions lost, but it is the very real consequences it has had on suffocating the potential of our people and country to realise its potential.

State Collapse means our children attend schools with no toilets, it means our elderly go hungry for days not knowing when or if they will get the social grant they rely on just to get by. It has meant that millions more South Africans live with the indignity and fear of entrusting their loved ones to a health system that neglects, abuses and in many instances, kills them.

State Capture came to light two years ago and yet there have been no arrests of politicians or corrupt officials. The DA has called for commissions, laid criminal charges and made great endeavours to hold the ANC government to account. However, it is now clear that South Africa can no longer endure another five years of disastrous ANC governance. While we will continue to fulfil our Constitutional role to hold those who loot the public purse accountable, it is clear that the ANC cannot self-correct. They simply do not know how. It is now incumbent on the millions of South Africans to punish them for their broken promises.

Today, we are here to join the dots on how this reckless and self-enriching approach to governance has resulted in bankrupt state entities, increased criminal activity and the highest number of unemployed people since the advent of democracy.

State Capture hollows out tax collection as government levies corruption tax

Once the beacon of public sector excellence, the South African Revenue Service (SARS) has suffered massive institutional erosion since former president Jacob Zuma deployed Tom Moyane to head the tax-collecting agency in 2014. Over the last four years, as State Capture reached its zenith, there has been a revenue shortfall of approximately R100 billion, described by one senior SARS official as entirely self-inflicted. The agency’s notorious investigative capacity was dismantled, and honest taxpayers’ rights were violated as tax refunds were refused or delayed, causing some business to shed jobs and others to close entirely.  Meanwhile, Moyane ensured Gupta-linked companies received hundreds of millions of rands in tax refunds, often illegally paid into attorneys’ trust accounts.

Corruption has infiltrated the once proud tax agency with the illicit tobacco trade increasingly being overlooked, costing the fiscus an estimated R37 billion between 2010 and 2017. There is no clearer example of organised crime and corruption costing ordinary South Africans dearly, both in terms of money for service delivery and jobs.

In a desperate attempt to plug the revenue gap, the ANC has turned to levy corruption tax on each and every South African. From the increase in VAT to the increase in the fuel levy, South Africans have been asked to pay an inefficient and indifferent government more and more, precisely as the cost of living amid soars.

Throwing good money after bad

Nothing illustrates that abject failure of the ANC government better than our ailing state-owned entities (SOEs) which became the epicentre of the State Capture project and the embodiment of maladministration and unimaginable waste.

The list of SOEs that have been swallowing up tax-payers money is shamefully long and cannot be considered in its entirety. However, some have become synonymous with corruption, cadre deployment, poor governance and the ever-present threat of financial ruin.

Eskom

Eskom has received large injections of capital from the government to the detriment of spending on other key areas. A R23 billion capital injection in 2015 was soon followed by the dubious conversion of a R60 billion subordinated loan to equity in 2016 to strengthen the utility’s balance sheet.

While cash has been pouring in, State Capture allegations and financial mismanagement have been rampant with the sale of the Optimum mine to the Gupta-owned Tegeta; inflated coal contracts; and redundant McKinsey/Trillian consulting fees.

The two large, coal-fired power stations at Medupi and Kusile have also doubled in price since they were first commissioned, with poor project management, labour unrest, procurement irregularities and contractor incompetence leading the way.

While high electricity costs and power outages have acted a brake on economic growth, Eskom accounted for R41.5 billion in finance costs and continues to record annual financial losses, amounting to R2.3 billion in the previous financial year alone.

South African Airlines (SAA)

SAA has been one of the most inefficient and worst run SOEs, hollowed out by State Capture and mismanagement by ANC cadres. Since 2009/10, the airline has received bailouts to the tune of R11.5 billion –  this doesn’t even consider guarantees extended to the airline, the R5 billion transition finance agreement announced earlier in 2018, or the R21.7 billion promised over the next three years set out in SAA’s corporate plan. The airline is a good example that the ANC puts cadres before South Africa, as the airline has no strategic or developmental value, yet good money that could be used far better is given to the SAA elites.

 

Passenger Rail Agency of South Africa (PRASA)

Systematic corruption and mismanagement at the Passenger Rail Agency of South Africa (PRASA) have led our rail system into near collapse. The rail system is plagued by chronic delays, dangerous conditions and vandalism that is totally out of control. According to the Auditor-General, the entity and group had incurred a combined accumulated loss of R8.9 billion at March 2017, with another R14.1 billion in irregular expenditure during the 2015/16 financial year. The Public Protector’s 2015 “Derailed Report” described how top officials at PRASA handed out contracts to friends and allies, amounting to almost R3 billion. Corruption and mismanagement have led to a lack of safety officials and police which is making crime thrive and chronic delays are costing jobs because no alternatives are in place when the system inevitably breaks down. With the context of increasing fuel prices and record unemployment, it is shocking that the only truly affordable transportation has been brought to a standstill.

South African Broadcasting Corporation (SABC)

The after years of political capture and gross mismanagement, the SABC is now almost R700 million in debt. This week, senior employees revealed to Parliament’s portfolio committee that they are paying salaries first and thereafter utilities, in the hopes of just keeping the doors open. After meeting all of their obligations this month, the public broadcaster will have only R26 million left in its bank account.

The SABC has also failed in its mandate as the public broadcaster, acting instead as a captured “state broadcaster” that serves as an ANC mouthpiece and even dutifully airing videos made by the Party’s leader upon request.

This week we also saw hundreds of employees of the “Afro World View” news network, formerly known as ANN7, summarily lose their jobs because the network was forced to close its doors.

This comes amid an economic climate where millions of young South Africans struggle to find employment. The thought that employees of the SABC may soon follow suit is unbearable.

From State Capture to State Collapse: The Human Cost

Social grants

After a disastrous 2016/2017 in which the South African Social Security Agency (SASSA), Cash Paymaster Services (CPS), Net1 and the Department of Social Development came close to entirely collapsing the social grant systems, whilst spending R42 million on setting up unnecessary “workstreams” and wasting R1.4 billion in irregular expenditure, it was hoped that under a new Minister in 2018 the entity will turn itself around. So far, this hope is not holding up.

During the past few months, the DA has conducted numerous oversight inspections to SASSA pay points to monitor the process of switching over from CPS to the South African Post Office (SAPO). The process has been characterised by long queues and endless frustration. In July and again in August many grant beneficiaries had to wait for weeks to receive their money as glitches in the system caused many payments to not go through or to not reflect on beneficiaries’ cards.

Meanwhile, the cost of living has been rising steadily for South Africans across the spectrum, with enormous fuel price hikes driving up the cost of food and other commodities. According to the PACSA monthly food price barometer, the price of a basic food basket increased by about 7% between September 2017 and May 2018. Standing at just over R3,000 now, this is entirely unaffordable for the average family that rely on social grants for their income.

Local government in disarray

State Capture and State Collapse influences every single level of government, yet local governments are especially impacted, and their financial position is perilous. Only approximately 7% of our municipalities function well; 112 out of 257 municipalities had unfunded budgets in 2017/181; 87 municipalities are labelled as distressed; and 11 municipalities are under Section 139 interventions (under some form of administration). This is a clear picture of maladministration, and at the end of the day, the poorest of the poor pay the most for this maladministration and collapse of local government.

Maladministration is not the only issue, but blatant corruption is present at many municipalities. The clearest example is the fact that 15 municipalities illegally deposited funds with VBS Mutual Bank, in contravention of the MFMA and against the explicit instructions of National Treasury to not do so. It is highly unlikely that these municipalities will get their deposits back, estimated to be R1.5 billion. This will hamper their ability to provide services and could lead to a collapse of these municipalities.

Public safety

The Presidential Protection Unit currently employs 1,382 staff members at a cost of R693 million per annum, protecting a mere 17 individuals on a permanent basis. VIPs are kept safe by 81 protection personnel each, whereas ordinary South Africans have to make due with one police officer for every 369 people. In Nyanga in the Western Cape, the country’s so-called “murder capital”, the police-to-population ratio is an estimated one police officer to every 628 residents.

While current and former Heads of State and their spouses are safely protected, millions of South Africans live in constant fear of being the next victims of violent crime in our country.

Human settlements

There is currently a backlog of 1.8 million people registered on the Department of Human Settlement’s National Housing Needs Register (NHNR). The Department is a sterling example of how the ANC government has taken South Africa backwards.

In Mpumalanga, years of maladministration and rampant corruption under then-Premier DD Mabuza has left thousands out in the cold.  With a housing backlog of 183,555, a collapse of service delivery and spreading protests are the legacy of the Deputy President in the province. Indeed, under President Ramaphosa, looters and crooks have not been prosecuted: they have been promoted.

The DA has conducted countrywide visits and exposed how the failed ANC government has denied South Africans dignified housing. Too often even those residents who have been given structures continue to wait for the running water, electricity and proper sewerage systems to be fully installed at incomplete and crumbling houses.

Public healthcare

The ANC has decided to forge ahead with the National Health Insurance (NHI) scheme despite the dismal failure of the pilot projects around the country. This failure has cost South Africa a budgeted amount of R2,3 billion this year alone, and still, the failing ANC government would have us gut the private health care system, putting the health of South Africa in their exclusive care at a cost of almost R200 billion per year.  We are only now coming to grips with the trauma that began with a R1.2 billion corruption scandal in the Gauteng Department of Health and culminated in the deaths of 144 patients in the Life Esidimeni tragedy. We mourn the 499 cancer patients who died while awaiting treatment in KwaZulu-Natal in 2015 and 2016, the result of the oncology crisis which unfolded on the ANC’s watch. This government has broken our healthcare system and the NHI is a poisonous solution devised to fuel further ANC corruption.

Higher education

In a last-ditch attempt to shore up his corrupt patronage network, Jacob Zuma announced increased financial support for students in December 2017. This desperate attempt to sway the ANC elective conference in favour of his chosen successor, Nkosazana Dlamini-Zuma, is set to cost the taxpayers R43 billion extra as the National Student Financial Aid Scheme (NSFAS) is expanded over the next three years.

Zuma’s surprise declaration meant that NSFAS officials had less than a month before the academic year got underway to deal with tens of thousands of new applications in an already struggling system. Treasury and the Department of Higher Education and Training admitted that they were not consulted and were not ready. As a result, nearly 75,000 students who were awarded NSFAS funding for 2018 have not yet received their funding – eight months into the academic year. Stuck in limbo without qualifications or support, these students will not be securing lasting employment any time soon.

Basic education

School safety is one of the major casualties of the looting of the fiscus and Zuma’s Higher Education promise. The 2018 budget for school infrastructure suffered a massive cut of R7.2 billion, despite a backlog of schools that are falling apart and lack basic services.  Pit toilets at schools, in which two young learners have lost their lives in recent times, would cost R7.5 billion to eradicate – almost the exact amount cut from the infrastructure budget. 24 years after the advent of democracy, 3,898 schools still have only pit toilets for use, while another 3,040 have dangerous unused pit toilets that have not yet been demolished. Meanwhile, 97,000 learners who need transport to get to school safely are not receiving it, due to a budget shortfall of R640 million. These learners will never make it to post-school education or employment if their safety at school continues to be compromised.

Unsecured borders

Constitutional delinquent and ultimate Cabinet reshuffle survivor, Malusi Gigaba, has failed to attend to South Africa’s burgeoning immigration problem. Seemingly preoccupied with expediting the Gupta’s naturalization process, he has overseen a failing Department of Home Affairs (DHA) which simply does not have the capacity or the resources to identify, detain and deport illegal immigrants. In 2017 alone 384,357 people came into South Africa and failed to leave upon expiry of their visas – this figure only accounts for those persons from the top five ‘offending’ countries. Department figures dating back to 2013 put that number at well over one million. Our failure to deal with illegal immigration has cost the country R279 million over the last five years on deportations alone. And with fewer than 800 immigration officers in the country whose job it is to seek and arrest undocumented immigrants, undocumented immigrants often go undetected for years.

The asylum system has a backlog of more than 100,000 applications which, by DHA’s own admission, is a gross underestimation. The Department’s inefficiencies in the processing of asylum applications have led to asylum seekers – who followed proper procedures upon entry into the country – failing to get renewed permits timeously due to staff shortages and Refugee Reception Office closures. These applications are then kicked out of the system, rendering the applicants illegal. And these cases are not included in the backlog figure quoted above.

 

Water and sanitation

The Vaal River crisis is a potential environmental catastrophe. Accounting for some 45% of the drinking water in South Africans and 60% of economic water support supplied, the system forms an integral part of South Africa’s water supply.

The crisis was identified as far back as 2008, with studies by the CSIR pointing to high levels of toxicity caused by the discharge of raw sewage and industrial waste, the direct result of mismanagement, poor infrastructure development and lack of maintenance by the Emfuleni and Ngwathe local authorities. Water experts believe it could cost between R800 billion and R1 trillion to rejuvenate the water system.

Meanwhile, the Auditor-General found R6.4 billion in wasteful and irregular expenditure at the Department of Water and Sanitation, dating back to 2014 when Nomvula Mokonyane was appointed as minister. Mokonyane’s tenure included an unbudgeted amount of R2.5 billion for the Trans Caledon Tunnel Authority; the so-called “War on Leaks” programme, costing R524 million, was included under the service programmes and not budgeted for; and a staggering R848 million is owed to municipalities and water boards.

Moving South Africa Forward Again

The DA, as the Official Opposition, has done everything possible to hold the ANC-led government to account. Through our tireless work and using every tool at our disposal that corruption, State Capture, bad governance and institutional incapacity has been laid bare. The ANC has been given every opportunity to address these problems, be it through Motions of No Confidence in Jacob Zuma and his enablers or through our tireless drive to expose State Capture in the Legislature.

The Zondo Commission is finally up and running, and we hope it is given the space and support to complete its important work. It will take time. But we cannot ignore the fact that, to date, no-one has gone to jail and no senior politician has lost their job.

The DA believes that the ANC as an organisation must be called to appear before the Zondo Commission to explain their part in the project of State Capture, and we will be consulting legal advisors on how we can achieve this.

The DA in Parliament has done everything possible to uncover the rot and hold people to account, but Parliament itself has been sidelined and undermined by the ANC. In June 2017, four portfolio committees that were tasked by House Chairperson Cedric Frolick to investigate allegations of State Capture, yet it was the sterling work done by another portfolio committee, on Public Enterprises, that turned the tide and made it impossible for the stonewalling to continue.

The ANC is clearly not fit to govern. Indeed, it doesn’t matter who is tasked with leading the organisation. The failing ANC has brought the State to the brink of collapse and it has no idea how to turn things around.

It’s now up to the voters.

We will be launching our offer to South Africans, alongside all our Premier candidates next month. We will travel to every corner of the country, knocking on every door and speaking to South Africans. It is now time for voters to remove the failing ANC at the polls in 2019. We no longer can endure another 5 years of disastrous ANC governance.

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DA supports call for SAA to find “strategic equity partner”

The DA welcomes reports that the CEO of South African Airways (SAA), Vuyani Jarana, has committed to finding a “strategic equity partner” for the struggling airline.

The DA was alarmed when, in May of this year, reports surfaced of a “commitment letter” from National Treasury which suggested that government was to provide R21,7 billion to the ailing parastatal.

Although we hope that reports are true and SAA’s current CEO does not renege on this latest commitment, we do have our doubts about whether or not SAA will succeed in its search for an equity partner after recording losses of R5,67 billion in the 2017/18 financial year.

With massive state guarantees and frequent multi-billion rand bailouts, SAA and dysfunctional state-owned entities (SOEs) like it pose a significant threat to the financial stability of the country.

Any solution that addresses this risk and sets SAA on the path to recovery must be welcomed. Indeed, South Africa needs a re-evaluation of all SOEs and restructuring SAA may serve as a model for other parastatals.

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Re-imagining South Africa must be a collective effort

The following keynote speech was delivered today by DA Leader, Mmusi Maimane, at the South African Property Owners Association (SAPOA) Annual Convention in Durban, KwaZulu Natal.

Good morning, ladies and gentlemen.

It is an honour for me to stand here this morning on a stage that so many great speakers and thinkers have held before me.

This annual convention of the South African Property Owners Association has become an important date in our country’s calendar. It gathers an incredible number of influential people who are deeply committed to the South African project. It focuses thought and it seeks to find answers, primarily relating to the property sector, but also for a much wider application in our country.

So thank you for inviting me here today to speak to you about our incredible country – about some of the challenges we face as a nation, but also about solutions. Because that’s ultimately why we do what we do. That’s why the DA exists, and that’s why I serve my country through my party.

I have a vision for South Africa. But it is a vision that will require meaningful political and economic reform.

If we want to succeed in this multi-ethnic democracy, then we are going to have to move away from the politics of identity. We will need a political system in which people express their hopes and ideals rather than their race. And to do this we will have to start focusing on the things that unite us rather than that which divides us.

I believe the DA has workable solutions to the challenges our country faces, and our mission is to invite South Africans to join us in applying these solutions, sometimes improving upon them or even replacing them with better ideas. We believe the answers to the many problems we face will come from a broad partnership that includes multiple political parties, the business community, civil society, the education sector, religious bodies and activist citizens.

Importantly, we believe that the only way to solve our problems is for us to unite as a country. Right now there are many who want to take us back to a place we must never return to. They want to divide us by race once more. They want us to mistrust each other, blame each other, target each other. They do this not because they genuinely believe we should hate one another, but because it is their strategy to retain power.

But that’s not the future of our country. We’re not destined to grow apart again. We are meant to be one nation with one common future. I am convinced the overwhelming majority of South Africans believe this too, and will ultimately see through the populist rhetoric and racial nationalism that seems to dominate our conversations these days.

But I also know we will not build this country through platitudes and rhetoric. Any talk of resurrecting our rainbow nation has to be backed up by a solid, workable plan to meet our biggest challenge head-on. And that challenge is the economic exclusion of millions and millions of our people.

There are many aspects to this challenge. There are many factors that contribute to people being shut out of the economy. But the simple reality is that if we don’t find a way to open new opportunities for a third of our working-age population, we can forget about reconciliation, we can forget about building a nation with a shared identity and we can forget about re-establishing South Africa to its rightful place on the continent and in the world.

Twenty-four years into our democracy, the people no longer care for feel-good stories and promises of a better tomorrow. They are fast running out of hope. They need to see a change in their prospects, and they need to see it soon. But we will not see real change in our society without sweeping economic reform.

I’m sure you know all the numbers by now. You see the same Stats SA reports as I do. You read the same Labour Force surveys as I do.

The generous definition of unemployment says that 27% of our people can’t find work. But horrific as that is, the reality is actually a good deal worse. Because once you include what the statisticians call “discouraged jobseekers” – those who haven’t actively sought employment for several months – then that number shoots up to 37% of our working age population.

And most of these are young people. If you are under the age of 24, you have a two in three chance of being unemployed. There’s no other country in the world with this kind of youth unemployment rate. I don’t need to explain to you just how serious a threat this poses for the future of our country.

Already 55% our population live below the poverty line. At the rate at which young, poorly skilled people are leaving school, looking to enter a stagnant economy that is struggling to add new jobs, this percentage will not come down any time soon.

Along with this economic hardship comes social upheaval and the constant threat of violence. Protests have become a daily occurrence, crime is never far away in any community and political violence, like the killings in KZN, is threatening the stability of our country.

So where do we begin?

At the very highest level, government must understand its role in stimulating growth. And more often than not, this role is to step aside and let those in the business of growth do the hard lifting. Make it possible for the private sector to do what it does best, which is to run successful businesses of all shapes and sizes that can absorb workers at a far greater rate than anything we’ve seen in recent years. And at a far greater rate than anything government can provide.

Yes, the State still has a part to play as a provider of jobs, but often this should be as an employer of last resort. The notion that the State must grow our economy, control every sector and create every job is a relic of the past. We cannot cling to this outdated ideology any longer, because it will drag our country further and further down. We need to turn around and face the future.

The best contribution a government can make to growth and job creation – and this is something DA governments have learnt and implemented in both the Western Cape and the City of Cape Town over the past decade – is often simply to clear away obstacles.

Streamlining bureaucracy, reducing red tape, paying suppliers on time, supporting small businesses and new entrepreneurs, providing the infrastructure businesses need, ensuring as far as possible an uninterrupted supply of electricity – these are the things that inspire confidence and attract investment. The State also has a role to play in assisting new black entrepreneurs through access to start-up capital – what I call a Jobs & Justice Fund. These are the areas where government can make a difference.

Along with this shift from a State-led to a State-enabled economy, we must also look carefully and critically at every policy and piece of legislation – current and proposed – that might play a role in attracting or deterring investment. If we want to let the world know that we are open for business, then we have to walk the talk. Our current BEE model is an investment repellent. Our current labour legislation is an investment repellent. The mining charter is an investment repellent. And any talk of expropriating privately owned property without compensation is a massive investment repellent.

Investors make rational, unemotional decisions. When it comes to competing for their business, we’re playing in the same pool as every other country. If we still harbour any notions of a South African exceptionalism, then we must quickly learn to get over it. The world doesn’t care much for our back story and our special circumstances. If we can’t compete, then we will sink. It’s that simple.

There are many other things national government can and must do if we are to turn our economy around. This includes living within its means. We must urgently reduce not only the size of our massively bloated administration, but also our ballooning public sector wage bill. We must dramatically reduce irregular and wasteful expenditure, and we must come down hard on corruption in both the public and private sectors. Zero tolerance for waste and zero tolerance for theft is the only way forward.

We must clean up, and in some cases, clear out, our struggling State Owned Enterprises. Long after the Guptas and their lackeys have left the buildings, our SEOs – and particularly Eskom – will continue to haemorrhage money and cost taxpayers billions if we don’t make fundamental changes to the way they operate.

But if we are to do any of these things – if we want a clean, corruption-free administration, if we want to run efficient, business-friendly government departments, if we are to operate lean, successful SOE’s, then we have to appoint only the best, fit-for-purpose individuals to head up these bodies. As a country, we must walk away from the disastrous policy of cadre deployment – of rewarding unsuitable, unqualified or compromised people simply for their loyalty to a political faction.

Ladies and gentlemen,

We also need to recognise where our country’s potential for growth and development lies, and then direct the bulk of our resources there. If the past two decades have taught us anything, it’s that national government is particularly inefficient at unlocking this potential and spending our budget wisely.

Our cities, on the other hand, have the ability to kick-start our economy – and this is something we’re seeing across the globe. Not only are local governments far closer to the people they serve, and therefore more accountable and responsive, they also are in a better position to identify where and when to invest in crucial infrastructure projects.

One only need look at the recent successes of the City of Cape Town, both in terms of jobs created and new investments attracted, to see the benefit of an obsessive focus on improving the ease of doing business in the metro. Now, I know the city is not perfect either. I’m not going to try to convince people who are often frustrated by red tape and slow bureaucracy that the City of Cape Town is beyond reproach. I know there is still much that can be improved upon. But I also know they have been moving in the right direction for over a decade now, and it shows.

We need to empower our cities with both the mandate and the budget to spearhead our turnaround. But even such a shift to city-led growth will be futile if we continue to sabotage our economic recovery with populist rhetoric around land expropriation.

I know, for most of you, the debate around expropriation without compensation is the biggest issue facing the sector you operate in. I’m sure you are sitting here in this session today to hear my views, and the position of my party, on land. So I will say the same thing to you here as I have said in countless interviews, press conferences and opinion pieces since this debate began. Because unlike the ANC, who have flip-flopped on land from week to week, or the EFF who write one thing in their policy but say another to their supporters, the DA has been consistent, clear and unambiguous on this issue from the start:

The DA believes that land reform must be dramatically sped-up and expanded, and we also believe that this can and must be done within the framework of our Constitution and the protection it offers to property rights.

Those who claim this can’t be done are not being honest with you. If the Department of Rural Development and Land Reform had been properly funded, if corruption within the Department had been addressed, and if there existed the political will to make poor black South Africans land owners with title deed, then this could have been done. And if we had done this for the past two and a half decades, then land ownership in South Africa would have looked far different to the picture we see today.

Instead our government spends as much on its own VIP protection and security as it allocates to land reform. That says all you need to know about where the problem lies. To now scapegoat our Constitution for the failure to return land to the people is nothing but a last-ditch populist ploy to cover for 24 years of failed land reform. The Constitution makes sufficient provision for acquiring land for redistribution. All we now need is a government willing to test these provisions.

But what we can’t do is threaten the rights of those who own property, both current and in the future. Dispossession was a cornerstone of the Apartheid plan to subjugate the majority of our people. And once you start down this road, there is no telling where it will end or who it will target. It is inconceivable that we are prepared to meddle with this once more.

But equally important, property rights are the very foundation of our economy and enjoy protection in our Constitution for that reason. Without securing these rights, we will lose whatever slim competitive edge we might still enjoy as an investment destination. We could not pick a worse way to shoot our economy in the foot. And it is not the wealthy and the middle class who will suffer. It is poor, black South Africans desperate for work who will feel it the worst when investors pull the plug here.

If we want to empower poor South Africans, then we must extend property ownership to as many people as we can, and then protect their right to own this property through our Constitution. Title deed to a piece of land, no matter where and no matter how small, can be the key to financial independence. It can unlock capital for an entrepreneur. It can build a nest-egg for retirement. It can be passed on as an inheritance and provide the foot-up in life that so many young black families still don’t enjoy.

We need to speed this up in rural areas as well as in urban areas. We have to look at ways to empower farm workers as well as emerging black farmers, and we need to be creative and bold in our thinking. In the Western Cape the equity share schemes employed on many farms have given workers a real stake in the land they live and work on.

But it is in our towns and cities that we can really accelerate ownership through the transfer of title deeds. The DA has already made nearly 100,000 South Africans home owners in the City of Cape Town and the three other metros that now also have DA-led governments. And we are working hard at clearing backlogs and transferring even more title deeds.

I know it is not a simple undertaking, and that it’s often fraught with unforeseen complexities. As Helen Zille pointed out in a recent opinion piece on the Joe Slovo settlement upgrade in Cape Town, the loopholes that desperate people exploit in order to jump the housing queue can paralyse the process of building houses and transferring them to their rightful owners. But she also points out that the solution lies in not necessarily trying to implement a flawed national housing policy better, but rather in finding better solutions to providing low and middle income housing.

Many of these potential solutions lie in a partnership between government and the private sector – in providing subsidised housing that is affordable rather than free, or providing serviced sites and assistance for people to build their own homes.

There is not one single solution to our housing challenge. There will be many different solutions to address the needs of the indigent, the low-income families and, importantly, the many households that earn too much for a free home but too little to afford their own. I don’t know what all these solutions are, but I do know that many of you here in this room have thought about this long and hard, and have excellent ideas. And that’s why we must build strong partnerships.

Ladies and gentlemen,

We have come a long way as a country these past two and a half decades. But I don’t have to tell you that we still have much further to go. Every city and every town in this country still bears the scars of our past. Apartheid spatial planning still defines our society, like a permanent tattoo on our landscape. We still live, to a large extent, as a divided nation, and poor black South Africans still suffer because of this.

That’s our big challenge – to transform our towns and our cities into inclusive spaces, to bring poor people closer to work opportunities and to provide a wide range of housing solutions in well-located areas.

It’s a challenge that every country in the world has to grapple with. But, given our history and given the two worlds we have inherited, ours is just that much more difficult. And that’s why we need everyone on board. We can’t afford to turn against each other now, whether that’s race against race, or business against government. Our only hope of rebuilding South Africa is if we do so as a united team.

One nation with one future.

Thank you.

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DA to add Transnet ‘Traingate’ scandal report to criminal charges against Molefe & Gupta associates

The latest forensic report by law firm Mncedisi Ndlovu & Sedumedi (MNS) attorneys on the R15,4 billion price inflation on Transnet locomotives procurement will form part of the affidavit of the criminal charges that the DA will be laying against former CEO Brian Molefe, former Chief Financial Officer Anoj Singh, board sub-committee Chairperson Iqbal Sharma and Gupta lieutenant Salim Essa.

The MNS report recommends that corruption charges be brought against the four individuals and steps taken by Transnet to recover the money lost from Molefe.

This latest report follows a Werkmans Attorney’s report which found out that Brian Molefe, Gupta associates and current Transnet CEO, Siyabonga Gama, may have breached the Public Finance Management Act (PFMA) for “…serious breaches of statutes, regulations, corporate governance and unlawful conduct in relation to the transaction – involving billions of rand”.

That two reports from different law firms have reached the same conclusion on the magnitude of the criminal enterprise that Molefe and the Gupta associates presided over for the benefit Gupta-linked firms, provides enough evidence for a criminal investigation to be instituted without delay.

Transnet is a vital cog in South Africa’s economic infrastructure and the financial pilferage it endured at the hands of corrupt ANC deployees like Molefe may have cost thousands of jobs that could have been created had the money been put to good use.

It is therefore essential that, while criminal charges are pursued, the current Transnet Board must act on the MNS recommendation to recover money lost by Molefe through his deliberate acts of economic espionage.

Failure to do so will render the entire Board complicit in violating good corporate governance practices which enjoins them to act against any perceived threats to Transnet’s financial health.

President Ramaphosa must understand the collapse in governance has not only taken place in ANC run provinces but had also become pervasive in State Owned Enterprises (SOEs). Taking stern action against Gupta lieutenants is an essential first step in fixing the culture of corruption in SOEs.

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Revitalising our State Owned Enterprises – The DA’s 6 point plan

In the 2016/17 financial year, 38% of all SOEs made losses totalling a staggering R53.7 billion. South Africa’s SOEs are in serious financial distress.

The current state of SOEs is also a damning indictment on the lack of clear vision and political will from the ruling party. The ANC does not have the appetite to unlock the true potential of SOEs in order to drive growth and job creation.

What our SOEs require is a complete turnaround strategy and DA has a sound six-point rescue plan which will revitalise our parastatals.

1.  De-politicalising SOEs

Political appointments to the boards of SOEs through the ANC’s cadre deployment policy must come to an end.

Board members should be:

  • Appointed based on their business knowledge and expertise;
  • Vetted for political connections and conflicting business interests;
  • Subject to lifestyle audits every year;

 2. Introduce professional expertise

SOE boards and top management must have commercial expertise and requisite skills to create environments in which decisions are made with profitability or sustainability in mind.

Ou State Owned Entities should have:

  • A greater emphasis on graduate recruitment programmes;
  • A revamp of employee-compensation systems in line with international best practices; and
  • Rewards and promotions based on merit, not tenure.

3. A focus on becoming competitive

The Department of Public Enterprises is the sole shareholder of SOEs.

The result is that profitability and economic sustainability is conflated with ideological and political concerns.

  • SOEs should have clear mandates that set financial objectives and sustainability as primary goals;
  • Key performance indicators that contribute to the creation of a performance-based culture;
  • Profit and non-profit objectives of SOEs must be clearly defined and matched to industry standards and best practices;

4. Good governance based on transparency

SOEs must become more transparent in order to minimise the opportunity for corruption.

  • SOEs should communicate regularly on progress achieved with regard to KPIs and on social and financial objectives to maintain public support and buy-in;
  • Performance agreements with executives must be publicly available and executives must be held accountable for these;
  • The tender awarding process for contracts over a certain value should be made open to the public;
  • Procurement oversight at SOEs must be strengthened through the creation of internal procurement oversight committees.

5. Accelerate the introduction of private equity partners

It is unsustainable for government to continue to support financially unviable SOEs. The Department must accelerate the process of restructuring ownership. This requires the government to look at the partial or full privatisation of a number of SOEs by bringing in private equity partners and disinvesting from non-core SOEs urgently. Privatisation which can stimulate a more dynamic industrial infrastructure; provide SOEs with the fiscal discipline of the marketplace; and bring in vital cash injections, skills, systems and expertise.

6. Streamline government oversight

It is urgent that we dissolve the ineffective and pointless Department of Public Enterprises and manage the SOEs under their rightful Departments.

Transnet should return to the Department of Transport. Eskom should move to the Department of Energy and Denel should go to the Department of Defence. This would improve the lines of accountability and communication and also align SOEs with the efforts of their rightful portfolio.

South Africa cannot afford to continue down the downward spiral of underperforming and financially distressed parastatals.

The reality is that while our SOEs are failing, the biggest losers are the average citizens on the ground, as service delivery is no longer a priority for parastatals.

The DA’s action plan will go a long way in ensuring that good governance and efficiency is restored in our SOEs.

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DA’s rescue plan to transform SOEs will make service delivery to citizens a priority

Note to Editors: The following statement was delivered by the DA Shadow Minister of Public Enterprises, Natasha Mazzone MP. Ms Mazzone was joined by the DA Shadow Minister of Communications, Phumzile Van Damme MP, and the DA Shadow Minister of Transport, Manny de Freitas MP. The full document can be found here.

South Africa’s State-Owned Entities (SOEs) are currently failing to perform their most basic mandates – providing services and opportunities to the citizens of our country. Instead, SOEs stumble from one crisis to another and average South Africans, especially the poor, are left to bear the brunt of the ANC’s continued broken promises.

The reality is that if we do not turn around the current status quo at SOEs, our economy could face possible collapse. Urgent reform of our state entities is desperately needed.

SOEs represent a major risk to South Africa’s economy with government guarantees reaching R466 billion in the 2017/18 financial year. Another R10 billion was borrowed against these guarantees over the period, taking the total exposure up to R300 billion.

Billions of rands which could have funded higher education for the poor, housing projects, build clinics and schools, fund effective job-creation initiatives and replace pit toilets at schools – have been allocated to prop up falling SOEs under the leadership of ineffective executives.

In the 2016/17 financial year, 38% of all SOEs made losses totalling a staggering R53.7 billion. Among the biggest offenders were PETROSA, PRASA, SAA, SABC, SANRAL, and SAPO, which made a combined loss of more than R15 billion, nearly 28% of total losses. The combined profitability of SOEs fell from 0.8% in 2015/16 to 0.3% in 2016/17.

It is evident that South Africa’s SOEs are in serious financial distress. This is largely due to State Capture, corruption, financial mismanagement, poor governance and a general lack of state oversight.

Just because State Capture has been exposed, does not mean SOEs are in the clear. The hard work will only start now.

Just recently, the existence of a “commitment letter” emerged which, according to the SAA CEO, contains a commitment by National Treasury to “inject capital” into the struggling national carrier. This seems to indicate that government will provide SAA with the R21.7 billion it requires to stay afloat.

This “commitment letter to inject capital”  has seemingly also made it possible to persuade banks to lend SAA R5 billion.

It is still unclear whether Cabinet is aware of this letter, but the DA will submit a PAIA application to make the letter public, as its contents could have massive implications on the fiscus, and ultimately National Treasury.

Cyril Ramaphosa’s “New Dawn” must be more than a mere slogan. If the pertinent challenges at SOEs are not attended to with haste, large-scale corruption will continue to fester.

An effective turn around strategy is needed to ensure that SOEs get back to the work of service delivery, after years of parastatals being abused by Gupta-linked companies receiving dodgy tenders, children of top management awarded multi-million rand contracts and certain ANC politicians and private companies colluding to defraud the state of billions.

The level of corruption and mismanagement was able to manifest because the operations of SOEs often go unchecked and their dominance is largely uncontested.

It is for the same reason SOEs have developed into archaic monopolies. With no competition to drive innovation, it is no wonder parastatals are underperforming and continue to cost taxpayers billions in bailouts. This is once again proof that reform is needed.

The current state of SOEs is also a damning indictment on the lack of clear vision and political will from the ruling party. The ANC does not have the appetite to unlock the true potential of SOEs in order to drive growth and job creation.

Instead of creating tangible change for the poor and marginalised, the ANC exploits SOEs to line the pockets of loyal cronies.

Under the disastrous term of disgraced former President, Jacob Zuma – SOEs, such as Eskom, essentially became cash cows for the Guptas and their lieutenants to loot. Minister of Public Enterprises, Pavin Gordhan, estimated the total amount syphoned from South Africa at R100 billion.

What our SOEs require is a complete turnaround strategy and DA has a sound six-point rescue plan which will revitalise our parastatals.

  1. De-politicalising SOEs

Our SOEs need to become depoliticised. Political appointments to the boards of SOEs through the ANC’s cadre deployment policy have come at the expense of exceptionally skilled and knowledgeable candidates.

Not only does this lead to stagnation, but also opens parastatals to the possibility of being captured by political rent-seekers or connected individuals. To this end, the DA would advocate for board members to, among other things:

  • Be appointed based on their business knowledge and expertise;
  • Be vetted for political connections and conflicting business interests with the SOE and its suppliers;
  • Lifestyle audits should be carried out annually; and
  • A Codes of Good Practise should be instituted.
  1. Introduce professional expertise

Often SOE boards and top management lack commercial expertise and requisite skills to create environments in which decisions are made with profitability or sustainability in mind. This can be attributed to the ANC’s policy of cadre deployment and the absence of young graduates at SOEs.

Some of the DA’s proposals in this regard is the following:

  • A greater emphasis on graduate recruitment programmes and the hiring talented immigrants, who can bring much-needed skills;
  • A revamp of employee-compensation systems in line with international best practices, which is linked to stringent performance criteria; and
  • Rewards and promotions should be based on merit, not tenure.
  1. A focus on becoming competitive

The Department of Public Enterprises (DPE) is the sole or main shareholder of SOEs. This means SOE executives often have to juggle multiple conflicting and opaque financial and social objectives. The result is that profitability and economic sustainability is conflated with ideological and political concerns. Furthermore, SOEs are often shielded from competitive pressures given their monopolistic nature in the market, allowing them to become bloated and inefficient.

For this reason, the DA proposes that:

  • SOEs have clear mandates that set financial objectives and sustainability as primary goals;
  • Key performance indicators (KPI) are selected, contributing to the creation of a performance-based culture;
  • Profit and non-profit objectives of SOEs must be clearly defined and matched to industry standards and best practices for financial targets;
  • Non-core activities and assets need to be examined and if necessary sold off, franchised, outsourced, or terminated; and
  • SOEs must pursue an operational campaign focusing on improved technical capabilities and a more effective working culture with excellence at its core.
  1. Good governance based on transparency

SOEs must become more transparent in order to minimise the opportunity for corruption. A major reason for the corruption is the lack of clear and transparent procurement of contracts and tenders for politically connected parties which have hampered service delivery.

The DA would see that:

  • SOEs communicate regularly (monthly) on progress achieved with regard to KPIs and on social and financial objectives to maintain public support and buy-in;
  • Performance agreements with executives must be publicly available and executives must be held accountable for these;
  • The tender awarding process for contracts over a certain value should be made open to the public at the adjudication stage to avoid cases of political interference; and
  • Procurement oversight at SOEs must be strengthened through the creation of internal procurement oversight committees, consisting of selected internal auditors that would report to the board.
  1. Accelerate the introduction of private equity partners

It is unsustainable for government to continue to support financially unviable SOEs. The Department must accelerate the process of restructuring ownership. This requires the government to look at the partial or full privatisation of a number of SOEs by bringing in private equity partners and disinvesting from non-core SOEs urgently. Privatisation which can stimulate a more dynamic industrial infrastructure; provide SOEs with the fiscal discipline of the marketplace; and bring in vital cash injections, skills, systems and expertise.

The sales of SOEs would need to be managed by an independent board to prevent oligarchs from forming. Share options for employees can be offered to get buy-in for privatisation from workers. The Competition Commission would need to be strengthened to regulate the sale of SOEs as they are currently under-capacitated to deal with this mammoth task.

  1. Streamline government oversight

It is urgent that we dissolve the ineffective and frankly, pointless, Department of Public Enterprises and manage the SOEs under their rightful Departments.

For example, in the case of Transnet, the government should return it entirely to the Department of Transport. Eskom should move to the Department of Energy and Denel should go to the Department of Defence. This would improve the lines of accountability and communication and also align SOEs with the efforts of their rightful portfolio.

Another option would be to move and consolidate SOEs to different departments. Clustering and centralising them in the following groupings: commercial, development finance institutions, statutory corporations, and non-commercial SOEs.

Reducing the number of SOEs and streamlining them where appropriate, would be a necessity. This will mean better synergy and efficiency and it will reduce the demand for monitoring resources.

Conclusion

South Africa simply cannot afford to continue down the downward spiral of underperforming and financially distressed parastatals. The DA’s action plan will go a long way in ensuring that good governance and efficiency is restored in our SOEs.

The reality is that while our SOEs are failing, the biggest losers are the average citizens on the ground, as service delivery is no longer a priority for parastatals.

South Africans deserve SOEs to be proud of. We need reliable public transport services and an efficient power utility, among other crucial services, and the DA’s rescue plan is the first step in improving services to our citizens, especially the poor.

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DA cautiously welcomes SIU corruption probe

The DA welcomes President Cyril Ramaphosa’s decision to order the Special Investigation Unit (SIU) to investigate corruption at Transnet and Eskom. This investigation is long overdue given the damning evidence that has surfaced regarding corruption and financial mismanagement at these two entities, linked to politically connected individuals.

The DA is firmly committed to rooting out corruption within our state-owned entities (SOEs). The Public Enterprise Committee’s Inquiry into Eskom, which the DA has been actively involved in, has done sterling work in uncovering large-scale corruption at Eskom.

We have also laid numerous criminal charges against former Eskom CEO Brian Molefe, former Eskom CFO Anoj Singh, Gupta-linked firm Trillian, McKinsey, SAP and the Bank of Baroda based on allegations of their involvement in looting the state through SOEs.

We offer our full cooperation to this investigation and trust it will be thorough and concluded as soon as possible.

For far too long, individuals and entities have been allowed to loot the state without consequence. Investigating the rot within SOEs is the first step Ramaphosa must take in proving that he is serious about fighting corruption. However, Ramaphosa’s decision cannot be lauded until the necessary steps are taken to bring the perpetrators of State Capture to book.

The DA will keep an eye on further developments regarding the probe into State Capture and will not rest until those who are found guilty are held accountable.