Limpopo faces R2bn shortfall - Gordhan

Thursday, January 19, 2012
Chris Bathembu

Polokwane - Finance Minister Pravin Gordhan says the national government will continue to work with Limpopo officials as part of the process to rescue that province from its financial woes.

This comes as a clear picture was painted by Gordhan and other national ministers - including the Ministers of Public Works Thembelani Nxesi, Health Aaron Motsoaledi and Basic Education Angie Motshekga - of the state of affairs in Limpopo.

Gordhan spoke to reporters for the first time on Thursday since Cabinet decided late last year to intervene in the running of at least five Limpopo provincial departments by placing them under administration as per section 100 (1) of the Constitution.

Thursday's press conference laid bare the extent of the problems in the province, which Gordhan said may have started as far back as in 2010.

He revealed that the Limpopo government faces a potential shortfall of R2 billion at the end of the current financial year. National Treasury will have to restructure the province's finances in order to find savings of R2 billion to cover the shortfall.

In addition, the provincial Treasury had an overdraft at the Reserve Bank amounting to R757 million in November last year. The province wanted to increase this to R1 billion.

Compounding the challenge for Limpopo is the large accumulation of unauthorised expenditure of up to R2.7 billion. This is attributed to financial mismanagement, wasteful expenditure and revelations that certain companies were even being paid eight times a month, a clear departure from the rules as stated in the Public Finance Management Act.

"Once National Treasury received a request from the province to increase its overdraft facility, officials undertook careful due diligence and came to the conclusion that without a section 100 (1) intervention, the province would not be put on sound financial footing," Gordhan said.

Section 100 (1) gives members of the national executive the powers to take over management and administration of the affected provincial departments.

Officials apparently also requested an additional R500 million from the provincial government's commercial bank, which was declined.

"Throughout last year, National Treasury had cautioned the Limpopo provincial Treasury that the province would not have sufficient cash to finance its 2011/12 budget obligations," said Gordhan. The province had been spending beyond its means and this had to stop.

While Premier Cassel Mathale and some MECs are still responsible for certain functions, officials from the national government, including several Cabinet Ministers, will remain in charge of finances in the province until it is put on sound financial footing.

Some ministers, including Gordhan and Nxesi, have even taken over the role of MECs in their respective portfolios, while new accounting officers have been introduced in some departments.

Gordhan further charged on Thursday that since the intervention, there was sufficient evidence that service was being "sabotaged" to make government look bad. This follows stories this week that hospitals were not supplying food to patients and that schools had not [received] stationery at the start of school calendar this week.

"We have evidence of this (sabotage) but we will leave it to the law enforcement agencies... The unfortunate part is that in all of this, it is the Limpopo province that pays the price for this and that is not fair - we can't allow that to happen," he said.

Asked if the events were an indication that the system had been infected by corruption, Gordhan said a forensic investigation stood ready to find out what has been happening in the province and that if there was evidence of any corrupt activity, the law would take its course.

"We intend to follow the law; all of us follow the Constitution and we have to be accountable - the facts will speak for themselves."

Referring to the staggering figures, Gordhan said it was clear that the national government needed to rescue the province from its dire financial situation, which he said was starting to affect basic service delivery in the broader Limpopo.

"Cabinet's decision to intervene in the province's financial management demonstrates our belief that clean administration and efficient service delivery is critical to achieving and sustaining a better life for all."

Government appealed to the people of Limpopo to be assured that everything was being done to fix the province's problems.

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