In an historic first, the ANC-led government has admitted that two provinces are on the brink of economic collapse and in dire need of financial bailout.
It emerged yesterday that widescale maladministration and possible criminal intent in Limpopo, Free State and Gauteng has forced the National Treasury to dip into reserves amounting to billions of rands to rescue a looming crisis.
The economic embarrassment has forced the cabinet to place eight departments in Limpopo and Free State under administration, effectively meaning that the National Treasury will play big brother to their finances.
In a shocking statement, cabinet spokesman Jimmy Manyi revealed how the three provinces - with Limpopo faring the worst - plunged into financial difficulties, forcing the government to urgently review provincial spending and devise elegant solutions to a situation analysts describe as "embarrassing to the country".
A cash-strapped Limpopo alone has asked Treasury for a R1-billion bailout on top of a R757.3-million overdraft to pay for November salaries.
Gauteng needs R627-million to pay for salary increases and faces "chronic problems" with large accrual and other financial disasters. It is not clear how much Free State has requested from the Treasury.
Manyi said the cabinet had been "concerned" about the state of financial management and governance in the three provinces for some time and that the drastic move was necessitated by trends of unsatisfactory spending, overspending and challenges with supply chain management.
"The Minister of Finance Pravin Gordhan was asked by cabinet to urgently review the situation in Limpopo and other provinces and report back to cabinet on proposed actions to be taken to improve the financial situation and its impact on service delivery and provincial functions," said Manyi.
- The intervention, as decided by the cabinet yesterday, will entail:
- Key departments in Limpopo and Free State being placed under administration;
- The cabinet assuming responsibility for Limpopo's treasury, education, transport and roads, health and public works departments;
- The cabinet issuing directives for Free State's treasury and police and roads and transport departments;
- Gauteng signing agreements with ministers of health and finance to address financial challenges in the provincial health department;
- Gauteng being assisted with financial management and supply chain management issues;
- Forensic investigations with strict deadlines to be carried out; and
- A monitoring committee under Gordhan's leadership, assisted by six other national ministers.
And though the ANC might have egg on its face over its failure to adequately deal with its finances in the three provinces it holds majority power over, the cabinet said heads would roll if the investigations uncover any illegal conduct.
MECs, heads of departments, chief financial officers and other appropriate officials will also be replaced by the national acting deployees on a case-by-case basis.
According to Manyi, a cash- strapped Limpopo had used up its R757.3-million overdraft facility with the Corporation for Public Deposits and had asked that its facility be increased by R1-billion to pay salaries and wages on November 23.
"This request was declined but alternative arrangements were made for an early transfer of their equitable share," said Manyi.
Efficient Group chief economist Dawie Roodt said yesterday: "I don't think government realises the kind of damage something like this does to the economy. At the moment, as things stand, we are barely managing ... we are not in trouble as yet, but we are not comfortable," said Roodt.
He attributes the provinces' financial woes to incompetence and the ANC's cadre deployment tendencies.
)
