Failing ANC racks up R75.6 billion in irregular, fruitless and wasteful expenditure

Issued by John Steenhuisen MP – Chief Whip of the Democratic Alliance
07 Oct 2018 in News

The DA has analysed the 2017/18 Annual Reports of government departments and selected entities that have been tabled in Parliament. Our analysis reveals a shocking level of financial mismanagement and wasted funds by the failing ANC government.

Irregular expenditure

Irregular expenditure occurs when expenditure is not properly managed and is sometimes an indicator of corruption. When government spending cannot be properly tracked, it becomes much easier to cover up corruption and directly enables State Capture.

Total irregular expenditure has reached a staggering level of R72.6 billion. The composite analysis complied last year by the DA revealed that total irregular expenditure, across all departments and entities, stood at R42.8 billion. The figure for the most recent year is double what was incurred in the previous year and does not include all departments and entities as some are yet to table their report.

 The departments and entities that spent the most money irregularly are:

  • Eskom – R19.6 billion
  • South African National Roads Agency Ltd (SANRAL) – R10.5 billion
  • Transnet – R8.1 billion
  • Department of Water and Sanitation – R6.2 billion
  • South African Broadcasting Corporation (SABC) – R5 billion
  • Water Trading Entity – R4.9 billion
  • Department of Correctional Services – R3.2 billion
  • Property Trading Management Entity (PTME) – R2.3 billion
  • Department of Basic Education – R1.7 billion
  • Department of Defence – R1.7 billion
  • Department of International Relations and Cooperation (DIRCO) – R1.2 billion
  • South African Social Security Agency (SASSA) – R1.7 billion
  • South African Post Office (SAPO) – R1 billion

Fruitless and wasteful expenditure

Fruitless and wasteful expenditure cannot be explained away through misfiling of receipts or harmless delays in implementation. This is expenditure that has no benefit to the public and is wasted due to a lack of reasonable care and the basic requirements of management.

Fruitless and wasteful expenditure totals another R3 billion – enough money to build 75 new schools.

The departments and entities that wasted the most money are:

  • Water Trading Entity – R1 billion­
  • Compensation Fund – R446 million
  • Department of Defence – R398 million

Reports still outstanding:

As bad as these figures are, they are just the tip of the iceberg: serial offenders Denel, the Passenger Rail Agency of South Africa (Prasa), South African Airways (SAA) and SA Express have not yet tabled their annual reports for 2017/18. This means that the totals for irregular, fruitless and wasteful expenditure is likely to be much higher than what we are currently able to glean from the reports which have been tabled.

Departments and entities which have still not tabled their reports, as is required by law, are:

  • Department of Energy
  • CoGTA
  • State Security
  • Prasa
  • Denel
  • SAA
  • SA Express

Prasa is suffering major institutional failure and continues to lose Metrorail trains to arson on a monthly basis. SAA suffered a loss of R5 billion in 2016/17. Denel has been left scrambling to recover R400 million in losses due to its ill-fated relationship with Gupta-linked company VR Laser.

Despite this, the ANC government has continued to pour public money into bailing out these failing entities.

If these entities report the same irregular and wasteful spending figures as they did in 2016/17, the total amount of money spent irregularly could rise to R94.5 billion. Fruitless and wasteful expenditure could rise to R4 billion.

Financial collapse:

The Auditor-General has identified one department and seven entities that are at serious risk of financial collapse. These are:

  • Department of Water and Sanitation
  • Compensation Fund
  • PetroSA
  • PTME
  • Public Protector
  • Road Accident Fund (RAF) – financial loss of R26.4 billion
  • SAPO – financial loss of R908 million
  • Water Trading Entity – financial loss of R573 million

In addition, the SABC is considered to be commercially insolvent.

The Department of Social Development has a negative cash flow balance of R12.7 billion, and the Department of Water and Sanitation has admitted that it is essentially broke. The Public Protector – an office that is supposed to protect citizens from corruption and maladministration – reported an R18 million financial loss and almost doubled irregular expenditure.

These are not unimportant departments and entities. They are crucial to governance and to service delivery, yet they are treated as little more than sources of finance to be exploited – with devastating consequences.

These are not abstract figures. Mismanagement and wasteful spending results in poor service delivery and skyrocketing costs to the public. Yet the ANC continues to make the public pay for its terrible mismanagement and corruption, in higher electricity and water prices, increases in VAT and fuel taxes.

South Africans are being asked to pay more and more for their electricity. The National Energy Regulator has given Eskom four years to recover R32.7 billion and has allowed it to increase tariffs by 4.41% this coming April. Eskom wants a higher increase though and has applied for an additional 15% increase for next year.

The near-total collapse of the RAF has led the ANC government to raise the RAF levy in the fuel price – South Africans must now pay more for fuel in order to fix the ANC’s failure to manage the RAF properly.

The Department of Water and Sanitation is drowning in debt as a result of the tenue of Nomvula Mokonyane as Minister. The Department has now taken the extraordinary step of asking Parliament to revise its budget so that it can meet basic service delivery targets. Unfortunately, metros like the City of Cape Town have been forced to raise water tariffs to ensure their continued water supply because the national government has failed to do this.

Endless bailouts of the most corrupt state-owned entities have drained public funds, requiring a VAT increase that impacts poor South Africans the most.

Despite this ever-greater financial pressure on South Africans, service delivery has ground to a halt. SAPO cannot deliver the mail, never mind the social grants that SASSA can’t seem to administer successfully.

NSFAS failed to pay out to thousands of funded students, despite the promises of the wayward former president. And President Cyril Ramaphosa has admitted that lethal pit toilets at schools will only be phased out in 18 years’ time.

The country’s finances are in a dire state. Not only did they ANC get us to this point, but they have no plan to fix what they have broken.

South Africans have an opportunity in the coming election to refuse to reward this lack of accountability, and instead, choose a party that has an absolute commitment to transparency and good governance.

Where the DA has taken over failing ANC governments, it has succeeded in sorting out the financial mess and improving service delivery in remarkably short periods of time.

The DA can build One South African for All, not just the politically connected friends of the ANC.