Department must stimulate economy, not support patronage network

27 June 2017

The expanded unemployment rate in the Northern Cape Province stands at 43% and is the highest in the country. These are people who would like to work, but cannot find a job and or have given up looking.

These are mainly poor black people who are excluded from the economy - unable to provide for themselves and their families and are denied the independence, self-esteem and opportunities that a job confers.*

In addition, the youth unemployment rate in the province stands at 36% and it is also the highest in the country. Youth unemployment has aptly become known as “South Africa’s ticking time bomb”. Young people are beginning to feel a sense of alienation from the larger society and a sense of betrayal by the Gupta-led ANC government, because they realise that their lives have not changed for the better since 1994.

I am mindful of the fact that the role of the department is to create an enabling environment for job creation, rather than to create jobs itself.

The department must take sound decisions and allocate resources with the common good in mind, rather than for the benefit of a patronage network.

The Economic Growth and Development Fund is used to allocate financial resources to politically connected enterprises. The Department has allowed corruption, abuse of state resources and financial mismanagement to thrive in this fund.

As it stands, the department cannot provide the criteria or the transfer policy it uses to approve beneficiaries of the Economic Growth and Development Fund. This suggests that allocations are based on the gut feel and political bias of officials administering the fund. Indeed, report after report reveals that politically connected individuals are being enriched– at the cost of deserving, emerging enterprises.

Entrepreneurs must be judged according to their business plans and not political connections. When are honest entrepreneurs going to get a chance when government officials set up companies with front directors? What is proposed in the department’s budget is just the continuation of a slush fund which operates in the very outer limits of transparency and legality.

I have requested Standing Committee On Public Accounts (SCOPA) to investigate the misappropriation of taxpayer money in this fund, specifically the R26 million that was allegedly used to fund the provincial conference of the Gupta-led ANC.

With the notable exception of the Northern Cape Tourism Authority, the department’s public entities are functioning as criminal enterprises.

These entities each have their role to play in developing the provincial economy, whether it is through the promotion of investment or the efficient regulation of licenses, which can generate revenue for the provincial fiscus. The money they get must develop the provincial economy to support the sustained creation of jobs.

The Northern Cape Gambling Board was disbanded in March 2017 and to date the MEC has not appointed a new board. Section 28 of the Northern Cape Gambling Act confers powers to the board, to receive and advertise licences. But in this public entity, the acting CEO has received and advertised applications for bookmaker licences despite not having the power to do so. This is a violation of the Northern Cape Gambling Act, which vests the authority to receive and advertise licenses in the Board.

But why? The answer is simple. She is acting in furtherance of a corruptive collusion. She is doing the bidding of somebody very senior in the department. When this criminal conduct was put to the acting HOD in the committee, he simply says the new board will consider the licences.

The NCEDA Board was appointed in June 2015, but has never performed its statutory functions. Instead the MEC has delegated the executive powers of the board to acting Chief Executive Officer.

Section 2 of the Northern Cape Economic Development, Trade and Investment Promotion Agency Act clearly stipulates that the entity must have two units, namely an economic development unit and a trade and investment promotion unit. While the trade and investment promotion unit has been expanded to include special economic zones, the economic development unit has been disestablished and its staff absorbed into the department.

The department and its entities are breaking the law. This public entity is a creature of statute and if the establishing act is no longer deemed relevant, the appropriate remedy is to repeal the act – not to fund its continued violation.

While the entity can barely be described as operational, the department budgets a 52% increase in its allocation for the financial year. Without an active board, without an administration following its own laws, what return on this investment will we see?

The Northern Cape Liquor Board complains that it lacks the funding necessary to update its licensing system, which it describes as prone to manipulation and abuse. But while the entity complains that it does not have enough money to perform its main responsibility effectively, the CEO and the CFO have unlawfully inflated their salaries.  The position of the CEO is level 13 and the CFO is level 12. But their salaries are not proportional to their levels. The CEO receives a level 15 salary and the CFO gets a level 14. That is a total of R1.2 million for the CEO and R1 million for the CFO. While the rest of the staff members have not received salary increases.

The CEO has also employed two of her friends. One of them was dismissed from the Gambling Board recently for misconduct. These two friends have referred the board to the CCMA for not appointing them permanently and guess who represented the board at CCMA? None other but the CEO herself and the award was in favour of her friends.

Even within a constrained fiscal environment, the public entity’s financial problems are clearly not the consequence of limited resources. It is rather the result of deliberately increasing the compensation of top officials who then complain that the entity is underfunded.

I will now request the Public Protector to investigate these salary increases.

I will also ask the Public Protector to investigate the appointment of the Acting HOD. It can never be that the accounting authority of the department is also the HOM. The drafters of the Public Service Act and Ministerial Handbook did not envisage this.

The department’s budget proposals allow for officials at the public entities to break laws with impunity – and reward themselves richly for doing so.

The Democratic Alliance will not support a budget which does not direct its attention to the establishment of an environment conducive for economic growth and job creation. And until the department realises that their mission is to create this environment, we will not support them.

Issued by Boitumelo Babuseng, DA Provincial Spokesperson for Economic Affairs, 27 June 2017