Accruals bad news for EC finances and economy

Accruals or outstanding payments of provincial departments in the Eastern Cape totalling a monstrous R3.889-billion have been carried forward into the 2017/18 financial year, an increase of 56%.

If debt continues to rise at this rate in the Health Department, for example, there will be no money left in four years’ time except to pay salaries. For a voice clip in English, click here: 

Accruals bad news for EC finances and economy

Accruals or outstanding payments of provincial departments in the Eastern Cape totalling a monstrous R3.889-billion have been carried forward into the 2017/18 financial year, from the 2016/17 financial year, which is an increase of R1.409-billion or 56%, in one year. This exposes the tornado of financial mismanagement sweeping through government departments, which has devastating implications for the province.   In contrast, the DA-government in the Western Cape has accruals in the region of only R200-million.

If the accruals (debt from the previous years) continue to climb at the current rate, the Eastern Cape finances will become a pyramid scheme which is on track for overall collapse.  Given the fact that the national tax revenue shortfall for this financial year is in excess of R50-billion, it is unlikely that we are going to get any bailouts.

These accruals have a crippling impact on some of the provincial departments as well as our struggling Eastern Cape economy. The knock-on effect of business not being paid within 30 days – last year 6 478 – is horrific.  It results in bankruptcy and layoffs, which add to the unemployment rate of which the Eastern Cape is the highest in the county, at 35.5%.

Our accruals should be decreasing not increasing.

In reply to a legislature question I asked Finance MEC Sakhumzi Somyo, he said that in the last financial year (2016/17), accruals totalled R3.889-billion compared to a total of R2.480-billion in the previous financial year (2015/16).  For 2014/15, they were R1.671-billion. For the reply, click here: Reply to IQP 138 q 216 accruals

If debt continues to rise at this rate in the Health Department, for example, there will be no money left in four years’ time except to pay salaries.  This means the health department is on the road to becoming completely dysfunctional.

In the departments of Roads and Public Works and of Human Settlements the accruals more than doubled, from R319.8-million to R640.9-million and from R218-million to R510-million respectively. Debt owed by the Office of the Premier increased by an astounding 181% from R12.6-million in 2015/16 to R35.7-million in 2016/17. The Health department run up a total of R1.914-billion in accruals in the last financial year, compared to R1.342-billion the previous year.

To prevent the province from going over the fiscal cliff, one needs strong leadership, tightened internal controls, effective supply chain- and procurement management as well as disciplinary action taken against those responsible for financial mismanagement.

Under a pro-jobs DA-provincial government, this reckless financial mismanagement would be brought to a grinding halt so that provincial departments could continue to deliver services and our economy flourish. — Bobby Stevenson MPL, Shadow MEC for Finance 

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