IN THE past week, Walter Sisulu University has made the front pages for all the wrong reasons. Among myriad other crises, it was declared "technically and commercially bankrupt" by the Department of Higher Education and Training. But its problems are hardly unique. South African has suffered a spate of bankruptcies recently, and the extent of the problem is worth analysing. By way of illustration, in no particular order, here are 10 public institutions that are now effectively bankrupt. 1. Athletics South Africa (ASA) ASA is under administration for the second time. The man put in charge, Zola Majavu — who quit in June — stated the federation was effectively bankrupt and that "if ASA were a business, we would be put under business rescue". "We are trading recklessly and we don’t have sufficient liquidity," he said. Among other debtors, it owes R1.6m to the South African Revenue Service (SARS). It has about R300,000 due in outstanding payments to Soweto Marathon winners and has been unable to pay its staff a 13th cheque. Meanwhile, the sport minister has acknowledged that ASA "does not have a high-performance programme in place to support elite athletes in preparation for the 2016 Summer Olympics in Rio de Janeiro" — indeed, that it does not even have a strategic plan for this term, never mind the Olympics. 2. African National Congress (ANC) Youth League Facing a South Gauteng High Court application for the liquidation of the league, ANC secretary-general Gwede Mantashe revealed it had neither the money nor the assets to cover R15m worth of lawsuits brought against the organisation, most of which stem from outstanding payments to caterers for its chaotic 2008 conference. The situation is so dire that when the sheriff tried to attach the youth league’s assets, there were none to be found. The league itself has acknowledged the debt runs into the tens of millions of rand. League member Magasela Mzobe said of the problem: "We are getting letters (of demand) every week; to date it’s about R50m." 3. Limpopo province A single institution going bankrupt is one thing, an entire province quite another. Nevertheless, in early 2012, the Treasury declared this entire province "technically bankrupt" and placed it under the administration of a national task team. Limpopo faced a R2.7bn shortfall in revenue at the time. Contributing factors included out-of-control official spending, a lack of supporting documentation for purchases (specifically on contracts that could not be verified) and procurement that was severely undermined by rampant corruption and nepotism as well-connected ANC Youth League members and "tenderpreneurs" benefited from irregular state contracts. 4. Boxing South Africa (BSA) BSA, like so many South African sporting codes, has always operated on the fringes of bankruptcy — but in recent years it has tipped. At one stage it owed SARS R8m. Presenting its 2011-12 annual report to Parliament, BSA revealed that, following its inability to pay staff at the height of the crisis, all money was now allocated to fill "gaps in day-to-day" expenditure and that there were "no approved funds available to meet strategic objectives". Although somewhat recovered, BSA’s assets have depreciated by 35%. It has in the past been unable to pay service providers on time because "there were literally no funds in BSA’s bank account". 5. Walter Sisulu University The Eastern Cape university is the poster boy for bankruptcy. Its situation is so far beyond the pale, it is fairly translucent. The institution has been operating on a deficit for about five years, yet approved enormous bonus payouts to its staff (R48m in 2012). It is now effectively closed. Despite an earlier bail-out of about R870m, it has made a further request to the Treasury for R3.15bn in relief. The scale of its problems puts Limpopo into perspective. Although 80% of its capital is spent on salaries, student debt stands at about R270m and its liabilities exceed its assets by roughly R970m. It is under administration for the second time as all and sundry try to resolve what appears to be an unsolvable problem. 6. Tshwane metropolitan municipality Tshwane metro itself denies it is bankrupt, although the person it is arguing with is the auditor-general himself, who declared it "technically bankrupt" in his 2011-12 report. The auditor-general had based that assessment largely on the fact that the metro’s credit account had peaked at R2.3bn. It failed to pay its R242m salary bill on time in January (it blamed a "technical glitch"), although mayor Kgosientso Ramokgopa says its assets can cover its liabilities by almost two-and-a-half times. Elsewhere, it was found that the metro was paying 10 times as much as other metros for some services. 7. Pikitup The Johannesburg metro public entity charged with collecting refuse has systematically collapsed over a period of time. By the end of 2011, its liabilities exceeded its assets by about R400m, up from R350m in June. To compound the problem, Pikitup’s acting MD at the time, Lawrence Boya, was arrested on charges of fraud and corruption. By the end of 2012, it had only reduced the deficit to R320m. The result has been difficult for residents who are often forced to endure refuse on the streets for days as fleet shortages prevent effective clearance. 8. uMzinyathi municipality Various South African municipalities are technically bankrupt, but uMzinyathi is a powerful recent example. Placed under administration in May by the KwaZulu-Natal provincial government as "bankrupt and overspending", it had increased its expenditure to such a degree that its capital budget could not cover the cost (one significant rising cost among many was its legal fees, which had increased almost 200%). Earlier, the provincial treasury had described the rampant misspending as meaning the municipality was "technically bankrupt". Among other problems, the province noted staff had been poorly appointed and there had been a disturbing increase in the amount spent on security guards in the mayor’s office. 9. Julius Malema Not an institution, but the list would not be complete without mention of him. In the case of the former ANC Youth League leader, it was SARS that made the claim, when it applied to the North Gauteng High Court earlier in 2013 to have him sequestrated on the grounds that he had outstanding arrears of about R16m. SARS argued Malema was "factually insolvent and in no position to make payment of his indebtedness". The result has been great personal cost to Malema, who has had to auction off property and assets in an attempt to repay his debt. 10. Basketball South Africa "We are bankrupt and very frustrated as a federation," said Basketball SA president Malesela Maleka in 2012. The reason for his frustration is the National Lottery — on which many sporting codes rely for supplementary funding — which has yet to respond to a two-year-old application. This means the organisation’s activities have effectively come to a standstill. It has effectively been bankrupt for two years. Summarising the chaos for Parliament’s portfolio committee in June, Basketball SA said some of the many challenges it faced included "a lack of credibility, poor leadership, low morale among players, no resources (coupled with a huge debt), dysfunctional provinces, and facilities". It is R6m in the red. Conclusion You will note that sports institutions feature prominently. There are many others likewise afflicted. The South Africa Football Association, for example, is "on the verge" on bankruptcy, about R100m in the red. Someone needs to look carefully at how sport is financed in South Africa. Otherwise, the problem cuts across everything from provincial administrations to higher education, and the scale runs from the millions to the billions. Much like the state of South Africa’s infrastructure, there is a project in the making here. A nongovernmental organisation or university with enough time and energy should take a composite look at the number of public institutions that have gone under since 1994 (these examples are all drawn from the past two years). Expand the net further and the problem is no doubt acute. The knock-on effects are profound. In the case of a provincial administration, for example, when service providers cannot be paid, the result is that private sector companies, often small and heavily reliant on state funding, collapse in turn. It would be interesting to document the number of jobs the government has cost South Africa and the number of companies forced to close on account of failed or late payments from the state, and to weigh that against "jobs created". In the meantime, when we are not talking about "moral bankruptcy", it is worth paying a bit more attention to actual financial collapse. Certainly, the evidence suggests the two are closely related.
Posted on: Thu, 05 Sep 2013 10:19:12 +0000
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