The Eastern Cape government's finances could become a “pyramid scheme” on track for collapse if “accruals or outstanding payments of provincial departments” in the Eastern Cape were not reigned in.
DA MPL, Bobby Stevenson, said on Thursday that accruals totalling R3.889bn have been carried forward into the 2017/18 financial year, from the 2016/17 financial year.
He said this was an increase of R1.4bn or 56%, in one year.
“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,” Stevenson said.
“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”.
Stevenson said 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%,” he said.
“Our accruals should be decreasing not increasing,” Stevenson said.
He said in a reply to a legislature question I asked Finance MEC Sakhumzi Somyo, the MEC 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.
“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,” Stevenson said.
