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South Africa’s Lost Billions – Imagine What Could Have Been Done With The Money…

SA lost bilions

South Africa is not a poor country, and yet we are a poor country. We are one of the most developed economies on the African continent, and yet we have so many areas still woefully underdeveloped. We are so rich in terms of minerals, natural beauty, wildlife, human resources…yet there never seems to be enough money to elevate the poorest of our people out of poverty.

Make no mistake – there is money in South Africa, and plenty of it. But it has sadly been squandered for years by corrupt sectors of our national, provincial and local governments.

A closer look at the numbers is enough to cause physical nausea when you realise just how much money has “disappeared” due to irregular, unauthorised or wasteful expenditure.

People like to blame our recent economic problems on Covid-19, but the pandemic is just a convenient scapegoat, and our problems go back much further than March 2020.

Reports from 2014 to 2018 released by then Auditor General Kimi Makwetu show an eye-watering increase in “fruitless and wasteful expenditure” of 236%. This equates to close to R300 billion in funds that were not spent as they should have been. And this doesn’t even include the R28.4 billion in irregular expenditure by two of South Africa’s biggest money black holes, Eskom and Transnet, whose audits were carried out by private companies.

The report paints an unhappy picture of billions of rand in funds allocated to municipalities being managed “in ways that are contrary to the prescripts and recognised accounting disciplines.”

Makwetu warned that these kinds of administrative and governance lapses “make for very weak accountability and the consequent exposure to abuse of the public purse.”

According to a recent article in Business Insider, South Africa’s new auditor-general Tsakani Maluleke reported that 111 (or 26%) departments and government entities produced “quality financial statements” and received clean audits, up from 98 entities the previous year.

This is excellent news, and I applaud the incredible efforts being made by government departments all over the country to improve and deliver on their mandates.

But it is unfortunately not enough. The same report highlights major issues pertaining to financial mismanagement.

Over the last three years, almost R7.5 billion of government expenditure was deemed fruitless and wasteful, including the incredibly frustrating figure of R150 million paid in interest on invoices that weren’t paid on time!

Maluleke’s report so accurately states, “A lack of consequence management continued to trigger the high levels of non-compliance and irregular expenditure.” He goes on to say, “A culture of no consequences has been created through the political and administrative leadership’s inability to implement consequence management for the pervasive non-compliance with legislation. Thus, the environment was vulnerable to misappropriation, wastage and the abuse of state funds.”

Just take a look at these findings:

  • Since 2016, the Department of Defence has been paying R108.3 million in rent for unoccupied office buildings.
  • In the 2019 financial year, the Gauteng health department had to pay R8 million in interest on medical claims not paid within the period stipulated by court judgments.
  • The same department also bought IT infrastructure without inviting competitive bids, resulting in a R148.9 million financial loss “as cheaper alternatives were available.”
  • The Department of Cooperative Governance paid R200 000 to dead people, and R7.1 million to non-qualifying civil servants, as part of a community work programme.
  • The Department of Water paid R18m for non-existent consulting services.
  • The Gauteng department of human settlements paid R2.5 million to the wrong contractor and hasn’t yet received the money back.
  • The Limpopo Department of Health paid R2.6m to lease radiology equipment at a local hospital that was not licensed for use due to safety concerns.
  • The Northern Cape Department of Health made payments for mammogram services even though the hospital where services were supposedly rendered did not even have a mammogram machine.

Of course, this is just the farcical tip of what is undoubtedly a far deeper, and far more serious iceberg.

And it all begs the following question:

What could South Africa have done with all those lost billions? How much better would the lives of millions of South Africans be now if that money had been spent properly?

How many people would already have had their Covid vaccination if we’d had the money to buy enough doses for all our people?

How many jobs would have been created if money had been channelled into industry, small business development and adult skills training?

How many qualified, educated graduates could we have produced, who could actively contribute to the ongoing development of our country, had more money been channelled into upgrading educational facilities and funding fees support programmes?

How many lives would have been saved if adequate training had been given to nurses and other medical staff? If essential equipment had been purchased and maintained? And if our ailing state hospitals had been upgraded?

And yet, when President Ramaphosa was asked in January this year about funding for covid relief and vaccine rollout, he responded, “We do not have the money . . . that’s the simple truth that has to be put out there.”

And we all know why that is.

“We are finally seeing the effects of bad governance and low growth,” says Daniel Silke, an independent political analyst.

“The problem is not the Covid shock but underlying fiscal imbalances that South Africa has not resolved for over a decade,” said Michael Sachs, a former head of the South African Treasury’s national budget office and an adjunct professor at Wits university in Johannesburg.

And, as the Financial Times reports, “South Africa’s debt has surged because growth has fallen far behind the interest rates the country pays to borrow.”

“There Are None So Blind As Those Who Will Not See”

Everyone who turns a blind eye to this problem is complicit in it. Those of us who look for solutions outside of our government are misguided at best.

I read, for example, an article in The Conversation which boldly stated that introducing a wealth tax on the richest 354 000 individuals in our country could raise R143 billion. The outrage of introducing yet another tax on the already taxed-to-the-hilt high earners to compensate for the endemic corruption in our country is actually not even the biggest issue with this thinking.

The big issue is…any scheme introduced to raise more money is just setting us up to throw good money after bad. Why do we think that money raised through a wealth tax would miraculously find its way to the right people when so much of the money raised through other taxes has failed dismally to do so?

The key is not to keep throwing money at the problem but to fix the problem.