.Image: Flickr/GovZA/OUTA

A Budget to fix the evils of poor governance: When will this change?

After years of promises, Budget 2023 has finally produced an Eskom debt solution and made a half-hearted attempt to address the municipal debt, which is one of the causes of Eskom’s woes. This gives rise to speculation that due to an election year coming up, the ANC would prefer to keep the lights on for broken municipalities, which is no doubt a more favourable situation for voters.

Budget 2023 is loaded with additional costs emanating from years of state capture and mismanagement. The most prominent example of this is the R254 billion bailout of Eskom’s debt over three years starting with R78bn in 2023/24, which is more than the allocations for defence and state security (R53bn) or courts and prisons (R51bn) or agriculture and rural development (R28bn). We trust this breathing space for Eskom means more maintenance for power stations and new energy generation but excludes any disastrous contracts such as with Karpowership.

OUTA is frustrated with another R1bn bailout to SAA, as well as R2.4bn to the dysfunctional SA Post Office. More taxpayer money being wasted on failed state entities. The Post Office is poorly managed and should be significantly reduced and restricted to fulfill only social responsibilities, while SAA should be privatised.

While in bailout mode, Minister Godongwana sneaked in another R300m for political parties, through the Second Adjustments Appropriation Bill for 2022/23, to be paid over before the end of March. We are concerned about this additional increase to the Represented Political Parties’ Fund, which is run by the Electoral Commission. Treasury’s contribution to this fund has increased significantly: R149m (2018/19), R158m (2019/20), R163m (2020/21), R167m (2021/22) and a massive R342m in 2022/23, which was more than double that of the previous year, and this now receives an extra R300m taking it to R642m for 2022/23. We note that the ANC is in financial difficulty, and we see this as abuse of taxes for a party that continues to rewrite the rules of transparency on private donations to parties. This additional funding is disgraceful, particularly in the light of urgent legitimate need in other sectors. For example, this is more than the NPA’s Investigating Directorate (key for prosecuting state capture) gets over two years: R366m in 2023/24 and R302m in 22024/25.

The additional resources for crime-fighting initiatives (including the extra R1.3bn for the NPA over three years to implement the recommendations of the State Capture Commission and Financial Action Task Force), are welcome and urgently needed to tackle corruption and criminal activities but this is not enough against the backdrop of the dysfunctional Post Office receiving R2.4bn. We do not see enough done to hold miscreants to account and Government is in need strong visionary leadership from the top down to bring about necessary change. The SAPS is one example of a dysfunctional department. Our concern is that these spending increases, as little as they are, might be in vain.

Recognition should be given for the improved collection rates by SARS and the fact that there are no tax increases this year. We are pleased that taxpayers who are helping out both themselves and Eskom by installing solar PV will get a tax break on this, however the tax break for household solar installations is very small – a maximum rebate of R15 000.

We welcome the announcement of no increase for the second year in the general fuel levy and the RAF levy, indicating that the minister realises that these are too high and the state should wean itself off such unsustainable taxes, and the break on the RAF levy on diesel for food manufacturers.

It is encouraging the hear about additional efforts to crack down on organised crime and extortion in the construction industry and the combating of illicit trade. However, we’ve heard this before and the government has been unable to implement effective crime prevention. The illicit trade in cigarettes is estimated at around 50%, losing the state more than R7bn a year in taxes from the loss of legitimate sales. Leadership change is urgently needed throughout the SAPS.

We note that Sanral is moving another R2.2bn from non-toll roads to the Gauteng Freeway Improvement Project (GFIP). It also calls the R23.7bn it received from national government in the adjustment in October last year for the GFIP a “partial solution” to the GFIP debt and says this allocation is “expected to provide the agency with sufficient funds to service several large debt redemptions and related maintenance in 2023/24”. OUTA once again reiterates the need for explanations from national government and Sanral over the size of the GFIP debt, the amount of money already transferred to Sanral and why these allocations were not used to reduce the GFIP debt.

We believe that much more can be done to cut down on waste, mismanagement and corruption. OUTA looked at the annual reports for 2021/22 of 40 national departments and found that nine of these did not declare their unauthorised, irregular, fruitless and wasteful expenditure (UIFW). Of the remaining 31, the total UIFW is R3.413bn. Similarly, we looked into the same for SOEs and found that 61 of 170 SOEs did not declare UIFW. Of the 109 that did, there is a total amount of R12.478bn. That is a total known UIFW of R15.891bn. This issue needs urgent attention and for those responsible to be held accountable.

We want to see tightening up of procurement oversight and transparency, as this is where so much money disappears. There is no point in handing increased budgets to departments and entities with long track records of mismanagement and corruption.

We want to see accountability in sectors which permanently mismanagement, for example, in local government. Municipal managers in municipalities with qualified audits and under intervention should not get salary increases or bonuses.

Budget 2023 is another budget aimed at fixing the evils of poor governance. We urgently need improved governance.

More information

A soundclip with comment by OUTA CEO Wayne Duvenage is here.

Below: Where your tax rand goes (information from National Treasury, cent-in-rand calculation by OUTA)