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

23 August 2018

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.

Issued by John Steenhuisen, Chief Whip of the Democratic Alliance, 23 August 2018