ANC’s history of bad debt

GOVERNMENT management of South Africa’s public monies is a curious paradox: we are very good at collecting it and very bad at spending it. What it is spent on is a matter of policy – a subject for another discussion. But the poor reputation stems from how public money is spent, and the financial culture within the ANC is at the heart of the problem.

So dire is the situation that to describe the extent of the mismanagement, we have developed a language of bankruptcy. The word “bail-out” is now associated with many significant institutions, a euphemism for “bankrupt”. With it, the words “unpaid”, “default”, “debt”, “arrears” and “outstanding amount” dominate the debate. Then there are the legal and technical financial terms used by the courts and the auditor-general: “liquidation”, “sequestration”, “qualified report”, “disclaimer” and so on.

It says much about the condition of a country’s financial management when such words define debate to a far greater degree than “profit”, “surplus” or “reinvestment”.

The first port of call in trying to explain the prevalence of these ideas is the government, which is controlled by the ANC, so it makes sense to look at the party and how it manages its own money.

What is the ANC’s financial culture? Answer that question and it becomes apparent that the government’s inability to manage its financial resources properly is not entirely due to poor policy decisions but, significantly, also the result of an organisation that for years has effectively operated in the red, unable to pay debts, plan long term or save money in lieu of future expenditure.

A few weeks ago, an article in the Financial Mail set out how the ANC still owed Blueprint Strategic Marketing Communications and other media service providers R10-million from the 2011 local government elections. The company has resorted to the law to secure the outstanding amount.

This is a familiar pattern. After the 2009 elections, Ogilvy & Mather, the advertising agency the party used at the time, was likewise required to pursue legal recourse to get money owed to it. It succeeded – four years later.

But advertising is but one area of financial concern among many for the party. In 2010, the ANC hired Robert Gumede’s IT group Gijima to install computer systems linking public representatives’ constituency and parliamentary offices. Work stopped halfway, following a funding problem. The ANC reportedly owed Gijima R29-million. Whether the ANC settled its debt is unknown, but Gijima filed for liquidation earlier this year.

The ANC hired a company called VWV to stage a production at its 100th anniversary celebrations in Mangaung last year. VWV was forced to bring an application before the courts to have the party liquidated after it failed to pay R12-million owed to it. The Mail & Guardian reported in July this year that the ANC had reached “a secret out-of-court settlement”. Court papers said the party had agreed to a revised repayment schedule. VWV’s attorney, Mark Saltzman, said the ANC “is simply unable or unwilling to pay the admitted amount that it owes to our client”.

Indeed, its anniversary was the source of many financial problems for the ANC. The Mercury reported in February that some of the contents of the ANC’s bank account had been attached after it failed to pay a range of service providers. The total amount is unknown but subcontractors were owed sums ranging from R75000 to R760000. One company had to forgo Christmas staff bonuses because of the ANC’s late payment.

Elsewhere, the ANC in the Western Cape is in a financial shambles. It has been taken to court for failure to pay about R1.8-million due to the Cape Town International Convention Centre, which it used in February 2011.

To compound the problem, in June the Weekend Argus reported it had defaulted on debt to Golden Arrow bus company, for 77 buses rented at a cost of about R300000.

After the sheriff again arrived at the ANC’s door, the party made a plan to pay off the convention centre in R100000 instalments. R1.5-million is still due.

The examples listed above are merely the most recent.

Perhaps most notorious of all is the ANC Youth League, effectively disbanded in its entirety and facing a South Gauteng High Court application for its liquidation. ANC secretary-general Gwede Mantashe has revealed it has neither the money nor the assets to cover R15-million worth of lawsuits that have been brought against it, 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 league’s assets, there were none to be found. The league itself has acknowledged the debt runs into tens of millions. League member Magasela Mzobe said of the problem: “We are getting letters every week; to date it’s about R50-million.”

But one can distil the problem down further, to individuals. Julius Malema is bankrupt, his property and assets auctioned off. In May, Winnie Madikizela-Mandela was forced to undergo a similar humiliation in an attempt to repay a debt owed to Abbots College.

In March, the homes of former Free State premier Beatrice Marshoff and former ANC provincial secretary Sibongile Besani were auctioned off to settle outstanding bank debt. And at the top of the pile is President Jacob Zuma, whose personal finances are so fraught they have tied up South Africa’s legal fraternity for almost a decade.

According to a 500-page KPMG forensic probe in 2006 into Zuma’s finances, former president Nelson Mandela gave him R1-million to help settle his debt, along with almost R4-million from Schabir Shaik. But, being Zuma, the banks were more forgiving. KPMG alleged several banks “bent over backwards” to accommodate Zuma and wrote off his debts because of his standing.

There is more to be written about how the ANC raises money to satisfy its needs. Oilgate saw it channel money through a public institution to help service an election debt. It took years to pay that off but no one was fired. Likewise, Chancellor House, effectively an ANC investment arm, has been embroiled in a range of dubious tenders and contracts.

But it is clear there is no culture of proper financial management inside the party, once it gets what money it can. It cannot raise capital against its expenditure in a measured and responsible way, and it spends lavishly when it cannot afford to do so.

Notably, its history of bad debt is often met by no real consequence. The ANC has no general public reputation as a poor and unreliable client. Service providers, although their patience over recent years has thinned, seem to largely accommodate the party’s disdainful attitude to its financial commitments.

It is hard to know where to draw the line when you are owed money, but perhaps it is time for the DA or some such organisation to keep a public register of bad ANC debts, so that potential businesses understand the nature of the organisation with which they are dealing.

In the meantime, when trying to understand how so much public money is wildly misspent, perhaps it is also worth looking at the distinction drawn between government and party. They are, really, the same thing on this front: two institutions driven by a culture of financial impunity, where reckless spending is routinely met by no real consequence and the bottom line hovers just above the red zone, occasionally dipping below.

The irony is, while often we demand accountability and transparency from the one, the other continues to operate in exactly the same fashion but out of the limelight. If the ANC were a private sector business, it would have been blacklisted a long time ago.

Gareth van Onselen writes for the Tiso Blackstar Group