Vice Chancellor Tweedie, I came across this piece of writing on David Masondo's facebook page, the very David Masondo you find pleasure in labeling "David Harvey Masondo". I haven't read my e-mails since Monday, and so there were many unread messages in my mailbox; but I did a quick scan to see if this hadn't already been posted here to avoid reposting what may already have been posted. But I couldn't find it, except for the YCLSA-Limpopo's press statement which reads like a response to "Harvey's" article. I may have missed it, if so please accept my apologies for bombarding you all:
The Politics of National Cabinet Intervention in Limpopo Provincial Government: Political Coup or Technocratic Fixing of the State? By David Masondo Introduction The City Press edition of 04 December 2011 published an article, which falsely claimed that the Limpopo provincial government is financially bankrupt. On 5 December 2011, the national cabinet held an urgent special meeting to discuss the state of financial management in the country, and then took certain decisions with regard to Limpopo, Gauteng and Free State. The cabinet press statement listed a number of financial problems besetting these three provinces, which include, but are not limited to budgeting, supply chain management (tenders) and human resource capacity in these provinces. The cabinet statement then invoked Section 100 of the South African Constitution, which enables the national government to intervene. As opposed to other provinces, Section 100 (b) was applied to the Limpopo Provincial Treasury, Education, Health, Public Works and Roads and Transport departments, according to which these provincial departments are now under national ministers. This means that the executive powers of these departments have been conferred to the national cabinet. There are two dominant explanations for this national cabinet decision. The first argues that the intervention is politically driven by internal ANC palace politics. That is to say, the intervention is intended to humiliate and deal with people who are perceived to be unsupportive of the current national leadership in the ANC, and therefore this is a political tactic to dislodge them. This explanation also argues that some leaders have made it their business to destroy other comrades under the pretext of defending other leaders in the ANC. The second explanation contends that the intervention is just an honest technocratic intervention to fix administrative, financial systems and processes in the provincial government. This explanation argues that the intervention has nothing to do with the politics of succession in the ANC. In this paper, I argue that the timing, mode and degree of national cabinet intervention in Limpopo through Section 100 (b) cannot be understood in a technocratic and amateurish legalistic manner, devoid of broader politics in the ANC, particularly the context of the ANC provincial congress scheduled for 17-20 December 2011 and the ANC national elective congress in 2012 . The strategy of the planners of the on-going coup seems to be premised on the logic that the current ANC leadership has political support in the ANC because it controls levers of the state machinery. Therefore, the current ANC leaders in government have to be removed from the state as a necessary political condition to displace them from the ANC leadership positions. Part of the tactic has been to run a campaign through the media accompanied by sporadic and well-timed anti-corruption marches by forces with serious political and economic interests in order to justify the coup against the current leadership in government. Unfortunately, this tactic has failed. The last and most desperate tactic is the application of Section 100(b) on the Limpopo provincial administration with the hope that this will generate fear and confusion amongst the ANC rank and file, and the public servants. Further that, civil servants would lose confidence in this “corrupt and bankrupt” government, fearing that they would not receive salaries and they would therefore need to revolt against it. So far this result has not been achieved. The ideology of technocratic fixing of the provincial administration has been used as a rhetoric and language to justify the political coup against the current Limpopo ANC leadership in government. If it were to be pursued seriously, it is clear that such a technocratic ideology also serves as paraphernalia to hide the failures of neo-liberal economic policies. After all, the post-apartheid state in general is a crisis-ridden state that is anchored primarily on defending business by pursuing neoliberal strategies. Pointing to the politics behind this intervention is not to deny the fact that there are technical challenges facing provincial government departments (and actually municipalities), not just in Limpopo. Instead, this is to argue that internal power politics in the ANC constitute the larger and significant part of the explanation on the timing, extent and degree of intervention in Limpopo provincial administration through Section 100(b). Put differently, had it not been for the provincial congress, the ideological stances of the provincial ANC and the forthcoming national ANC conference; this ill-conceived intervention would not have been applied as the intervention of the first instance. In relation the other provinces that were placed under Section 100(a) (which is lighter), the ploy is to make it less obvious to the public that Limpopo is the primary target. Yet, we know that members of the ANC-led Alliance and society in general will see through these political maneuvers and begin to place what is happening within its proper political context. I now turn to discussing financial issues, specifically the overdraft, cash flow and supply-chain management, which have triggered the cabinet intervention. History, causes and extent of the Limpopo overdraft This section of the paper seeks to define the extent, causes and history of the two financial issues that have triggered the intervention. It is not always easy to attribute one cause to any phenomenon. Phenomena tend to be caused by many factors. However, a sound explanation must accord one cause more weight and treat it as the most important if not the decisive one in certain historical moments and contexts. The nature and the degree of cabinet political intervention in Limpopo cannot be explained by the mere existence of the overdraft and cash flow scenarios. Certainly, the overdraft and cash flow in themselves were not the cause of the cabinet intervention but they created an opportunity for this political intervention to take place. The overdraft must also be understood within the context of the on-going economic capitalist crisis. The decline in economic growth makes it difficult for states to generate revenue and to carry out their functions. State revenue largely depends on higher economic growth (euphemism for higher profit rates), which enables the state to generate tax revenues from primarily from profits and wages. If the growth rate of profits falls and employment goes down, tax revenues also fall. This is the case in general, because of the on-going crisis. I will show below that this basic explanation, among others, completely overturns the legitimacy of the intervention. Having said this, it should however be borne in mind that historically, putting institutions under administration has never solved the problems. The very basis upon which the South African post-apartheid state is anchored is largely in defense of business interests through its pursuance of neo-liberalism. The crisis of the state is a crisis of the neoliberal strategy, which itself is a crisis of profitability. The overriding aim of neo-liberalism is to increase the rate of profit by, among other things, reducing the tax on profits shifting the burden to the working class, thereby increasing the rate of exploitation of workers. But the job losses and the depression of workers’ wages puts limits on the extent to which the neo-liberal state can be fiscally sustainable, since higher taxes are levied on an ever decreasing wage bill. That is why even at the national level, debt is used as the primary means to finance the ensuing deficits, thereby further entangling the state into the web of financial capital accumulation. That is also why the Limpopo budget overdraft, indeed all overdrafts, should be understood within general falling revenues in the national fiscus. Poor economic growth exacerbated by neo-liberal economic policies carried out by the post-1994 national government has led to decreasing state revenue. In this financial year for instance, the tax revenue is R13 billion less than the estimated amount in the February 2011 National Budget speech. National government’s budget deficit is at R143 billion, and pays almost R78 billion to service its debt costs to financial capital. This has a negative impact on the provinces’ equitable share. We point to this material reality rooted in the dynamics of the economy just to make a simple point that it is not just the technocratic fixing of the state or cutting down of public workers’ wage bill or mere replacement of one political leadership by the other that will finally resolve the mismatch between expenditure and revenue. The reasons and circumstances for the intervention in Limpopo go much deeper than this. Indeed the fiscal crisis of South Africa’s neoliberal state are far deeper and often masked, if not deliberately ignored, so that ultimately, instead of confronting imperialist and business domination as an albatross, we turn on each other within the movement. Let me turn to the Limpopo overdraft and its historical evolution. This overdraft arose primarily from progressively declining revenue streams, due to poor economic performance. This in turn has resulted in a consistent decline of Limpopo’s equitable share from 13.8% in 2006/07 to 12.7% in 2011/12 and it will decline further to 12.6%, 12.5% and 12.4% in the coming three financial periods. The money value of the Limpopo loss of 1.1% between 2006/7 and 2011/2012 is R2.8 billion. This R2.8 billion loss is not due to administrative difficulties, it simply arises from the impact of the crisis on the Limpopo economy. Nevertheless, the Limpopo provincial government did not sit idle; it tried to make savings, as will be mentioned below, so that this loss does not translate into a massive overdraft. The graph below starkly confirms this trend. Overdraft, 1999-2014, Graph 1 The above graph shows that the bank overdraft commenced in 1999/2000 financial year, reaching R600 million in 2003/04; R1.2 billion in 2006/07; R1.7 billion in 2010/11. 76.5% of the current bank overdraft is composed of salaries in the education and health departments. This is mainly due to increase of the salaries for specialist professionals such as doctors, engineers and teachers, to retain them in the public service. The second cause of the deficit is incomplete infrastructure projects, which predate 2009 as shown in graph 1. In trying to mitigate the negative effects of the overdraft, the Limpopo provincial administration reduced the overdraft from R1.7 billion to R1.5 billion in November 2011. In the same period, through its austerity measures targeting luxury goods such promotional materials, unnecessary travelling and so on, the provincial government Unfortunately, in the context of ANC-led Alliance politics, racism, tribalism, ageism, factionalism, statist-neoliberalism (i.e. the belief that solutions lie in fixing the state) and the general anti-worker sentiment that sees the solution in smashing wages the critical economic dynamics have been ignored. Embedded in each of the explanations are particular solutions. Factionalists in the ANC-led Alliance tend to argue that a mere change of the current leadership will solve the problem. To be sure, national and provincial politicians with the highest appetite for organizational power are already presenting themselves as messiahs to extricate Limpopo from this overdraft. Yet, many of them, including some who are currently serving in the national cabinet, politically presided over the rise of this overdraft as shown by the historical trend of the overdraft depicted in graph 1. Though cyclic, the overdraft definitely has an upward historical trend, it would therefore be interesting to know what those who presided over this overdraft said in relation to the intervention. In the context of media hype about corruption in Limpopo, factionalists in the ANC-led Alliance seeking to rise on the corpses of other comrades, have sought to concoct a spurious and inherent causal relationship between the overdraft and corruption. Indeed, theoretically, a certain degree of corruption does cause overdrafts. But overdrafts are not necessarily caused by corruption. Moreover, even if the trend of the overdraft can be explained by corruption, those historically responsible must be held to account. In addition, and in relation to the current cyclic upswing in the overdraft, corruption cannot be used as a primary driver, as I will demonstrate below. Firstly, the factionalists and opportunists argue that the overdraft was caused by corruption which apparently only starts in 2009. It should be made clear that there is no necessary relationship between corruption and the overdraft. A tender can be awarded in a corrupt manner without causing over-expenditure. Secondly, the graph demonstrates clearly that the overdraft reached its highest level of R1.2 billion in 2006/07 and reached the high of R1.7 billion in 2010/11. The gap between the two is R500 million. This amount is said to be caused by corruption and maladministration, apparently the R1.2 billion is not. The factionalists wrongly think the impact of the current Great Recession is only on the national fiscus, and does not affect provinces. The national government, because it does not have a “hard overdraft constraint”, also finds it convenient to hide behind the “global economic crisis” and to accuse workers of ballooning the public sector wage bill. Anti-worker politicians and senior state bureaucrats have consistently called for cutting of the workers’ salaries as a way of dealing with the overdraft, without demanding the same from the economic and political elites. Unfortunately, some in COSATU have merely called for a coup against the current ANC leadership to be replaced by some of the political and economic elite who did not only preside over the rise of this overdraft as MECs and heads of departments, but they are also business partners of those who are accused of corruption in the provincial state. Why would some in COSATU campaign against those in the provincial state and accused of corruption, but still support their business partners? So, one wonder if some in the COSATU leadership truly represent the interests of the workers or certain sections of the provincial business elites in the name of fighting corruption. No doubt, technocratic fixing of the state is very important. But our government in its totality also needs to articulate and adopt serious and radical economic policy decisions which include, but not reducible to exchange controls, nationalization of the key strategic industries to raise more revenue for development of poor provinces such as Limpopo. Indeed, a competent, incorruptible and skilled cadre in the state is part of the solution to ensure that those instrumentally in control of the state do not siphon public funds for narrow economic ends. But all these will require bold political leadership prepared to challenge economic ownership and control, not factionalists held bent to destroy fellow comrades in order to pursue their material interests. Dynamics of the cash-flow problem Cash flow problems do not mean that an institution or an individual has no money in the bank. But it is about how cash will flow into and out of the provincial bank account. This deals with the frequency and quantity of money that flows. Monies allocated to provincial governments do not reside in provincial bank accounts; instead national treasury transfers them to their accounts. If funds are not transferred to the provincial bank accounts system (called the Pay Master-General - PMG), it means a province will be without money to meet its financial obligations. The mismatch between higher expenditure and low cash flow also means that a province will be without adequate funds to fulfill its financial obligations. What then caused the cash-flow problems in Limpopo? 2011 Cash-Flow – Graph 2 The first immediate cause of the cash-flow problem is the wage-settlement. Government had budgeted for a 5.5% public sector wage increment for the current financial year. Ultimately, government settled at 6.8% with the trade unions. Provinces are expected to pay these monies even before the wage bill funds are transferred to the provincial accounts. Limpopo province backdated the payments for wage increases as far back as May - to government employees in September, hence the funds spent on the wages/salaries increased sharply in September 2011 as depicted in graph 2. As at 13 December 2011, the province is still awaiting the transfer of these funds into the Limpopo provincial account from national government. Another cause of the cash-flow issue emanates from the previous year’s infrastructure activity. To illustrate, national treasury withheld funds for 2010/2011 infrastructure projects. Because these projects were complete, contractors were paid from the overdraft facility, but funds from national treasury are still outstanding. The acceleration in 2011/12 of infrastructure projects has also increased our expenditure. In other words, some of the funds that were to be transferred in the next few months were paid earlier, through the overdraft facility, because work was done earlier than anticipated. The substantial improvements in our turn-around time for paying service providers has also created challenges in our cash-flow. This is part of a broader government strategy and commitment of stimulating – as opposed to frustrating – positive growth of SMME’s and entrepreneurs who do business with government. Limpopo has been instrumental in shortening our payment time-frame to 30 days; with the ultimate target of reducing this time to 14 days. This has also exacerbated our cash flow challenges. Provincial administration has requested the transfer of funds from National Treasury on the wage bill and outstanding 2010/11 infrastructure due to the province. In late November 2011, national treasury agreed that these funds would be transferred in December 2011. In light of increased infrastructure expenditure and plans to pay service providers within 30 days as well as national Treasury’s withholding of funds due to the province, Limpopo treasury requested national treasury to increase the quantity and frequency of the funds to be transferred to the provincial bank or increase overdraft facility not as a permanent arrangement, but to assist in navigating the expected tough period of November and December 2011. When looking at this overdraft problem from a cash-flow perspective it is clear that the Limpopo provincial government was plunged into the R705 million budget shortfall by the withholding of funds by national treasury. The ploy was to strangulate the province from paying workers their wages, thereby pitting the working class against the provincial administration. Having thus formented the contradiction, political conditions would be created to launch an offensive against the current provincial leadership. On the other hand, the current provincial leadership would not have an option since other provinces would not be in such big problems, and a national perception of runaway corruption would find traction even within the provincial structures of the ANC, which would rebel against the current leadership. However, the provincial structures have seen through the ploy and the whole exercise has come to zero. National cabinet differentiated politics of dealing with provinces with overdrafts The national cabinet statement argues that Limpopo has been placed under Section 100 (b) because it has not done enough to show its commitment to deal with the overdraft. The truth is that in this financial year, the overdraft has been reduced from R1.7 billion to R1.5 billion. Furthermore through austerity measures, which did not compromise the core functions or mandates of the departments, the provincial administration saved R28 million, which also contributed to the decline in the overdraft. Through standardization of government prices consumed by government, buying in bulk to realize the economics of scale, and budgeting for surplus, the provincial government will also further reduce the overdraft by more than R700 million, and eventually wipe it out in 2013/2014 as shown in graph 1. Within the context of fully expended 2010/2011 budgets by provinces, it is surprising then that Limpopo with the fourth lowest overdraft had to be placed under Section 100 (b). The pie-chart below depicting overdrafts of provinces shows that Limpopo would rank number four (4) with overdraft of R1.7 billion (now reduced to R1.5 billion, amounting to 3.9% budget deficit) and Gauteng with the highest overdraft of R4 billion (budget deficit of 5.9%), followed by Kwazulu-Natal with R3.3 billion (budget deficit of 4.3%) overdraft and then Eastern Cape at R3.1 billion (budget deficit of 5.9%). What explains this heavy handed and hostile approach against Limpopo, if it is not power politics within the ANC? I do not want to point fingers at other provinces because such an approach is a-political and ideologically flawed. What this picture shows is the innate fiscal crisis of the post-apartheid state that has been imposed by neoliberalism. It cannot be that provinces are inherently prone to overdrafts and national government is not, it simply does not make sense. As we have highlighted above, the current deficit nationally is R143 billion. If all the 9 provinces were responsible for R3 billion each, which is an overstatement, an amount of R27 billion worth of the national deficit would be due to provinces. This in turn would leave R116 billion. In short only 19% of the national budget deficit is accounted for by provincial overdrafts. Instead of dealing with the R116 billion, national government has resorted to isolating one of the most financially benign cases, Limpopo, for administration. The big question is that the fiscal crisis of the state is due to financial capital, which takes a whooping R78 billion as interest payment. Politics of time and sequencing In politics, time and sequencing matter. It is not a coincidence that the decision was taken 12 days before the ANC provincial congress. This decision was taken after a systematic media-driven campaign geared at portraying the Limpopo province as the most corrupt province. The application of Section 100(b) is supposed to serve, as a demonstration that indeed the province has the worst in financial management track-record and that its provincial leadership is incapable of sorting its minor challenges hence its leadership should be unseated. And this process ought to start in the ANC provincial congress. The aim was supposed to be last-ditch attempt at swaying ANC delegates to vote in a particular way. Of course, new tactics will tried in the post-provincial congress to carry out this on-going coup. Education, Health, Public Works and Roads and Transport departments Roads and Transport, Public Works, Health and Education have been placed under Section 100 1, (b) because of supply chain issues. The national government will investigate tenders awarded in the last two years to determine if there was value for money. The verbally stated and media reported terms of reference are too broad, thereby enabling the national cabinet to embark on an endless fishing expedition against whomever the coup is politically targeted at. Interesting, is the fact that the investigation into the tenders is only limited to tenders awarded in the last two years. Indeed if there is any act of corruption - whoever is implicated must be brought to book. But why focus only on the last two years? What about the last three years or more? Could it because the fishing expedition can catch some fish swimming in the national cabinet if the time-lines for investigation are extended beyond two years? Conclusion, Lessons and Way Forward Challenges facing the Limpopo provincial administration do not need Section 100 of the Constitution. In the spirit of co-operative governance, the national government should have convened a meeting with the departments concerned and jointly set up a plan to deal with the known challenges which all the provincial departments in Limpopo have resolved and some are currently being resolved. In my view, if this intervention was genuine and carefully thought through, the national cabinet should have conducted preliminary investigations, followed by a detailed diagnostic report, and a recovery plan, prior to applying Section 100. I would argue that a specific legislation should be passed outlining a much more clearer process to prior the application of Section 100 in order to limit the abuse of power by national cabinet. The national cabinet has also revealed the gap on the role of the ANC in decision-making processes regarding the adoption and the application of Section 100 of the South African Constitution, in the same way the last 52nd ANC national congress in Polokwane regulated the manner in which state presidents and premiers from the ANC should exercise their prerogative powers to limit the abuse of delegated power by ANC cadres in national government to settle political scores within the ANC-led Alliance. The ANC must improve its communications networks and channels with the people in a much more reciprocal manner. This experience has shown that a democratically elected government can easily be overthrown on the basis of misinformation. The deepening economic crisis will further generate more problems for the state’s capacity to generate sustainable revenue to meet growing societal needs. This will also require a serious shift of class power from the economic elites. This should include shift in control and ownership of economic resources. With regard to ownership, the working class should seriously take the issue of nationalisation of key strategic resources as a necessary condition for socialisation. Short of taking over the privately strategic economic resources, the working class should find ways of imposing its agenda on those who control investment decision by virtue of their ownership of these resources. Failure to do so, the deepening economic crisis will further put comrade against comrade, state departments against each other, national administration against provinces and so on. Increasing undesirable in fighting for economic resources, including state revenue. The immediate task for the Limpopo government and the ANC is to work with the national departments technical teams to correct certain systems, but reject the political agenda using the state machinery to settle inner party struggles. Working together with the national team, should include requesting detailed terms of reference for the implementation of Section 100 (b). Matching cash flow and expenditure is one of the technical questions that must be sorted out between national and provincial treasuries to avoid potential rationalization of colonization of provincial administration by the national cabinet, through Section 100, 1(b) in the name of fixing the state. Part of institution building is the maintenance of institutional integrity. This includes National Treasury, which has over years successfully built its institutional respect, notwithstanding its role in fostering neo-liberal economic policies. The ANC must still debate the future and role of provincial governments. The end -- Kind Regards, Thamsanqa Tu -- You are subscribed. This footer can help you. Please POST your comments to [email protected] or reply to this message. 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