tag:theconversation.com,2011:/id/topics/tender-33845/articlesTender – The Conversation2017-02-20T20:25:09Ztag:theconversation.com,2011:article/732242017-02-20T20:25:09Z2017-02-20T20:25:09ZThe real risks behind South Africa’s social grant payment crisis<figure><img src="https://images.theconversation.com/files/157480/original/image-20170220-15879-mmoju8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Social grant recipients waiting in Gugulethu, Cape Town. A battle over social grant payment tender threatens the system.
</span> <span class="attribution"><span class="source"> EPA/NIC BOTHMA</span></span></figcaption></figure><p>The <a href="http://www.iol.co.za/news/south-africa/gauteng/its-gordhan-vs-dlamini-over-r120bn-grant-contract-7765965">dispute</a> hovering over South Africa’s social grant system and threatening millions of vulnerable beneficiaries with nonpayment creates risks that go far beyond interrupting poor people’s access to desperately needed grants. </p>
<p>The failure of the South African Social Security Agency (<a href="http://www.sassa.gov.za/">Sassa</a>), which is responsible for the payment and administration of social grants, to act timeously has created a crisis that threatens to deliver grant recipients on a silver platter into the hands of unscrupulous financial services companies.</p>
<p>The latest instalment in the bizarre saga came last week. Sassa officials announced that they would <a href="http://www.enca.com/south-africa/sassa-to-file-court-papers-on-grant-payment-crisis-on-thursday">file papers</a> with the Constitutional Court proposing that their invalid contract with <a href="http://www.net1.com/business-structure/transactional-solutions-cluster/cash-paymaster-services-(cps)/">Cash Paymaster Services (CPS)</a>, which holds the contract for grant distribution, should be extended for another year. </p>
<p>This contract was awarded to CPS in a controversial tender in 2012. It was <a href="http://www.news24.com/Archives/City-Press/AllPay-wins-against-Net1-20150429">declared invalid</a> two years ago by the constitutional court, which instructed Sassa to reissue the tender. As the deadline came closer civil rights groups such as <a href="http://probonomatters.co.za/who-is-responsible-for-the-sassas-epic-social-grant-distribution-disaster/">Black Sash</a> started sounding warning bells that Sassa was not implementing the court’s orders. </p>
<p>Deadline after deadline passed, and by end the end of 2016 it was clear that Sassa had utterly failed to act on the court’s instructions. Late last week it appeared that Sassa had missed another one. It <a href="http://amabhungane.co.za/article/2017-02-18-grants-belamant-holds-a-gun-to-sas-head-as-dlamini-dawdles">didn’t</a> make its planned eleventh-hour submission.</p>
<p>This means that there is no credible arrangement in place to ensure that social grants will be paid when the court’s deadline expires on 31 March. The social grant system supports about 17 million individuals. Disrupting the payments will cause huge suffering to the country’s poorest and most vulnerable people and is likely to lead to social unrest. </p>
<p>With last week’s announcement, it seems that Sassa officials intended simply to present the constitutional court and the <a href="http://www.iol.co.za/news/south-africa/gauteng/its-gordhan-vs-dlamini-over-r120bn-grant-contract-7765965">National Treasury</a> with an impossible situation: condone an illegal contract, or face the possibility of social and political chaos. </p>
<p>But there’s even more at stake. If the court allows a further extension of the invalid contract (or approves a new contract with CPS), Sassa will have perpetuated a situation in which the accounts of grant recipients have in effect become mere conduits between the South African fiscus and the private financial empire that has taken shape around grant disbursement.</p>
<h2>More than just a contract is at stake</h2>
<p>At the centre of the storm is CPS, a subsidiary of <a href="http://www.net1.com/">Net1 UEPS Technologies</a> which is a listed global financial services and logistics group with operations in a number of countries including South Africa, India and Tanzania. </p>
<p>Net1 owns the fingerprint-based biometric identification and payment system that is central to CPS’s operations. Their proprietary <a href="http://www.net1.com/key-products/the-ueps-technology/">Universal Electronic Payments System</a> technology forms the “back end” of the Sassa smart card CPS uses in the electronic payment of grants. It is access to this system that has enabled CPS to roll out payments to the whole country. </p>
<p>While convenient for CPS, scholar Keith Breckenridge has <a href="https://books.google.co.za/books/about/Biometric_State.html?id=4YNxBAAAQBAJ&redir_esc=y">pointed out</a> that this creates an unprecedented situation – grant beneficiaries are captured within a private technological and financial network owned and controlled, not by Sassa, but by its service provider. </p>
<p>Here it should be noted that the work of CPS is only part of a bigger corporate strategy. Also part of Net1’s <a href="http://www.net1.com/business-structure/group-structure/">global empire</a> are financial services companies like MoneyLine, EasyPay, Manje Mobile Solutions, Smart Life and others. These companies act in concert to make use of the opportunities afforded by CPS’s control of the payment network. </p>
<p>Millions of grants beneficiaries, for example, have not only been provided with a Sassa account; their accounts have also been linked to EasyPay Everywhere, a bank account operated by MoneyLine and CPS’s banking partner, Grindrod Bank. All this is part of an <a href="http://ir.net1.com/phoenix.zhtml?c=73876&p=irol-SECText&TEXT=aHR0cDovL2FwaS50ZW5rd2l6YXJkLmNvbS9maWxpbmcueG1sP2lwYWdlPTg0Mzc0ODgmRFNFUT0xJlNFUT0xMCZTUURFU0M9U0VDVElPTl9QQUdFJmV4cD0mc3Vic2lkPTU3">explicit two-stage strategy </a>on the part of Net1: a first wave in which it rolls out its technological infrastructure, and a second wave in which it uses this infrastructure to market a wide array of products and services to an essentially captive customer base.</p>
<p>The net effect is that social grant recipients are now tied up in a web of dependency on financial services companies controlled by Net1. </p>
<h2>What this means for financial inclusion</h2>
<p>This creates two problems. Firstly, this arrangement may be in violation of competition law. It looks as if Net1 is making use of CPS’s privileged position as social grant paymaster to give its sister companies first bite and privileged access to a vast potential client base. </p>
<p>Secondly, it raises an issue that’s often forgotten in sweeping generalisations about the need to cover the “unbanked” with financial services. Yes, poor people need access to banking services, and may benefit from smart cards and electronic banking. But these services should be designed with their interests in mind. </p>
<p>Deborah James and Dinah Rajak have <a href="http://eprints.lse.ac.uk/59434/1/James_Rajak_Credit-apartheid-migrants-mines-money.pdf">shown</a> how in South Africa the history of “credit apartheid” and paternalistic control over poor people’s finance has created a situation where creditors wield disproportionate power. Unbridled financial inclusion of the poor may amount to adverse incorporation into a financial sector geared towards preying on them. Already, the Black Sash has collected evidence of troubling instances of <a href="http://ewn.co.za/2016/10/12/Social-grant-beneficiaries-call-for-an-end-to-illegal-grant-deductions">unauthorised and unlawful deductions</a> from accounts set up for grant recipients, often with very little recourse. </p>
<p>This is why the social grants crisis has implications beyond the distribution of payments. Sassa has missed a major opportunity to ensure that financial inclusion happens in a beneficial, “pro-poor” way. It failed to follow the Constitutional Court’s order that the payment of social grants should be done in a way that protects the rights, interests, and confidential data of grant beneficiaries. Instead, it has created a situation in which CPS and Net1 hold all the cards. At present, the Constitutional Court and Treasury have almost no leverage to prevent their service provider from simply walking away on 1 April 2017. </p>
<p>Already, Net1 CEO Serge Belamant has <a href="https://www.pressreader.com/south-africa/business-day/20170209/281479276157572">made it clear</a> that he is not interested in extending the contract on its present terms. He is in a position to ask for <a href="http://amabhungane.co.za/article/2017-02-18-grants-belamant-holds-a-gun-to-sas-head-as-dlamini-dawdles">whatever he wants</a> – including provisions that lock claimants even more tightly into his empire. </p>
<p>Sassa’s inactivity has created the worst possible outcome, not only in the short but also in the long term. A crisis over grant distribution looms, and the opportunity to provide meaningful financial inclusion has been missed.</p><img src="https://counter.theconversation.com/content/73224/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andries du Toit is the Director of the Institute for Poverty, Land and Agrarian Studies at UWC, a donor-funded research institute that relies on funding from a range of development and policy research organisations including the Department for International Development, the Economic and Social Research Council (ESCRC), the Department of Science and Technology (DST) and the National Research Foundation (NRF).</span></em></p>The South African Social Security Agency has created a crisis that threatens to deliver social grant recipients on a silver platter into the hands of unscrupulous financial services companies.Andries du Toit, Director: Institute for Poverty, Land and Agrarian Studies, University of the Western CapeLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/730872017-02-16T09:23:30Z2017-02-16T09:23:30ZWhy social grants matter in South Africa: they support 33% of the nation<figure><img src="https://images.theconversation.com/files/156969/original/image-20170215-27421-g4c06m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Thousands wait in line outside the social services office in Cape Town to register for grants.</span> <span class="attribution"><span class="source">EPA/Nic Bothma</span></span></figcaption></figure><p><em>The South African government’s failure to fix a <a href="http://www.news24.com/Archives/City-Press/AllPay-wins-against-Net1-20150429">corrupted</a> R10 billion social grant payment contract has caused a crisis that <a href="https://www.dailymaverick.co.za/article/2016-11-14-sassa-social-grants-distribution-doomsday-and-behind-the-scenes-move-to-save-17-million-grants/#.WKRhXG997IU">threatens</a> to disturb monthly payments to millions of vulnerable households. The Conversation Africa’s business and economy editor Sibonelo Radebe asked Jannie Rossouw to explain what’s at stake.</em></p>
<p><strong>What would be the impact if social grants weren’t paid?</strong></p>
<p>It would have a severe impact on poor and vulnerable households. In the 2017/18 fiscal year there will be some <a href="https://www.dailymaverick.co.za/article/2017-01-27-groundup-sassa-grants-contractor-may-have-to-pay-back-the-money/#.WKVakm997IU">17 million</a> grant beneficiaries, 11 million of them younger than 18. </p>
<p>But it’s important to note that the number of dependants exceeds the number of social grant beneficiaries by a considerable margin. In most cases grants, <a href="http://www.sassa.gov.za/index.php/social-grants">which include</a> pensions, disability payments and child support grants, support entire households. These households will be destitute if they do not receive grant payments in a timely fashion. They will not be able to buy food as households receiving grants typically don’t have savings. To survive they have to spend whatever they receive. </p>
<p>This is why both the Minister of Social Development, Bathabile Dlamini, and her department have been highly irresponsible for leaving the distribution problem in limbo for so long. This even after they were <a href="http://www.news24.com/Archives/City-Press/AllPay-wins-against-Net1-20150429">instructed</a> by the Constitutional Court to make alternative arrangements. It leaves the impression that the minister and her department want to force the country into a crisis, leaving no option but to get approval to continue using the current service provider.</p>
<p>Neither the minister nor the department have shown any urgency to bring this matter to a speedy resolution. It’s also disconcerting that the minister seems to live in denial. She’s failed to admit that there’s a pending crisis of national proportions.</p>
<p>The minister should take political responsibility for this crisis. If she refuses to accept responsibility, it raises the question of whether the ministry she runs is needed at all or can be merged with another ministry, as its largest single responsibility is oversight of the legal administration and payment of social grants.</p>
<p>It is also disconcerting that others in leadership positions in the government have remained quiet. In any other country the head of state would have stepped in to try and defuse the looming crisis. But it seems that expecting any action from President Jacob Zuma in a crisis – except if he stands to gain personally – is too big an ask.</p>
<p><strong>Why are social grants so important in South Africa?</strong></p>
<p>They’re very important because of extent of poverty, the consequent number of recipients, and the amount paid out. Total expenditure on grants in the 2017/18 financial year will amount to more than <a href="http://www.treasury.gov.za/documents/national%20budget/2016/speech/speech.pdf">R150 billion</a>. </p>
<p>Grant money is not only used to support beneficiaries. It’s also used to provide broader support. Based on <a href="http://www.ajol.info/index.php/na/login?source=%2Findex.php%2Fna%2Farticle%2Fview%2F142070%2F131811&loginMessage=payment.loginRequired.forArticle">research I conducted</a> more than one-third of South Africans depend – directly and indirectly – on grant payments. Any disruption of grant payments will therefore have a massively detrimental impact on a large number of poor households. </p>
<p>In addition, the economies of small towns and villages would be hit hard because they are heavily dependent on grant payments being used to buy goods and services in local shops. One knock on effect would be that shop owners’ income streams would be affected and they wouldn’t be able to pay employees’ salaries.</p>
<p><strong>What impact have social grants had on poverty alleviation in South Africa?</strong></p>
<p>Grant payments redistribute income to poor households and have contributed to a <a href="http://sds.ukzn.ac.za/files/WP%2058%20web.pdf">reduction in poverty</a> in South Africa. </p>
<p>The social grant net is the government’s biggest poverty alleviation and redistribution intervention. There are others, such as government housing provision and free water allocation. But payments in grants outstrip these by a large margin.</p>
<p><strong>What are the weaknesses in the system?</strong></p>
<p>The main weakness is the fact that the grant system was expanded during a period of rapid economic growth. In 2002 South Africa only had some <a href="http://www.plaas.org.za/sites/default/files/publications-pdf/Woolard_McEwen.pdf">4,2 million</a> beneficiaries of social grants.</p>
<p>This grew rapidly to about 17 million beneficiaries as the grants were expanded to include older children.</p>
<p>Because South Africa was going through a period of rapid economic growth at that time it could easily afford new spending initiatives and projects.</p>
<p>But since 2008 the country has suffered a period of low economic growth. And there isn’t any expectation that the situation is likely to improve in the foreseeable future. As a result the system has become unaffordable.</p>
<p>An additional concern is that the Minister of Social Development has suggested there may be an extension of child support grants. This is simply <a href="http://city-press.news24.com/Business/Are-we-heading-for-a-fiscal-cliff-20151011">unaffordable</a> and will push South Africa closer to the fiscal cliff – the point at which its spending outstrips its revenues and it can’t meet its debt obligations.</p><img src="https://counter.theconversation.com/content/73087/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jannie Rossouw is an NRF-rated researcher and receives research funding from the NRF. </span></em></p>The unfolding social grant payment crisis in South Africa threatens the livelihoods of a third of the country’s population.Jannie Rossouw, Head of School of Economic & Business Sciences, University of the WitwatersrandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/730032017-02-15T13:45:02Z2017-02-15T13:45:02ZThe odd meaning of ‘radical economic transformation’ in South Africa<figure><img src="https://images.theconversation.com/files/156805/original/image-20170214-25999-mxsvbj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Siphiwe Sibeko/Reuters</span></span></figcaption></figure><p>The only thing radical about South Africa’s ruling party’s understanding of “radical economic transformation”, a commentator once suggested, is its use of the word ‘radical’. The comment was made a few years ago, when the African National Congress (ANC) was in the habit of using the slogan to describe very modest change. Now it’s back. </p>
<p>In his 2017 state of the nation address South Africa’s President Jacob Zuma brought back the phrase “<a href="http://www.ujuh.co.za/zuma-what-do-we-mean-by-radical-socio-economic-transformation/">radical economic transformation</a>” causing nationwide <a href="https://www.dailymaverick.co.za/opinionista/2017-02-14-radical-economic-transformation-bollocks.-its-a-rent-extraction-opportunity/#.WKP_Dm997IU">debate</a>. Other senior ANC <a href="http://www.politicsweb.co.za/documents/what-we-mean-by-radical-economic-transformation--r">politicians</a> have done the same.</p>
<p>Have the ANC’s intentions changed?</p>
<p>To answer that, we need to understand why “radical economic transformation” is back on the ANC’s agenda. As with much of what happens in the ANC today, factional politics is a crucial part of the story.</p>
<h2>One slogan, two agendas</h2>
<p>The ANC has believed for decades that <a href="http://www.anc.org.za/content/50th-national-conference-resolutions-economic-transformation">change is needed</a> to speed up black people’s access to the economy. It has emphasised this over the past few years as it became clearer that economic exclusion remains a stubborn reality despite two decades of political change.</p>
<p>Translating this into reality is difficult. The country’s racial divisions ensure that government and business do not share the common goals which, for example, produced change and growth in <a href="https://www.google.co.za/webhp?sourceid=chrome-instant&rlz=1C1CHWA_enZA699ZA699&ion=1&espv=2&ie=UTF-8#q=asian+tigers+develoment+theory+miracle">Asia</a>. </p>
<p>At the time of negotiating and <a href="https://theconversation.com/how-ancs-path-to-corruption-was-set-in-south-africas-1994-transition-64774">assuming power</a>, the ANC recognised that it could not impose change since this would scare away capital. And it did not develop an effective strategy for negotiating with power holders in the private economy. The result was a gap between rhetoric and detail. </p>
<p>More than five years ago the ANC began talking about a “<a href="https://www.dailymaverick.co.za/article/2013-02-07-behold-the-second-phase-of-the-transition-ancs-big-plans-for-the-economy-and-the-state/">second phase</a> of the transition” to address social and economic change. Since then its documents and statements have tended to combine radical phrases with plans which simply tweaked what already exists.</p>
<p>And over the past few months, “radical” economic change has become a growing ANC preoccupation. This is not because its policymakers decided this. Rather it’s because its patronage politicians seized on the slow pace of change to justify their continued quest – in partnership with their private allies – to control public resources. </p>
<p>Triggered by the need of the <a href="https://theconversation.com/why-state-capture-is-a-regressive-step-for-any-society-56837">Gupta family</a>, which has been accused of “capturing” the state to protect their interests, they ratcheted up a campaign to paint patronage as a contribution to freedom.</p>
<h2>A familiar tale</h2>
<p>The story they tell has become familiar. “State capture” is actually the reverse: an attempt to take back a state already under the control of private interests. <a href="http://www.politicsweb.co.za/politics/zumas-interventions-will-deal-with-white-monopoly-">“White monopoly capital”</a>, this lobby insisted, controls the state and is determined to prevent a challenge by using claims of “state capture” to defame the forces of economic freedom.</p>
<p>As many commentators have pointed out, this is not about building an economy which includes more people but about justifying why some connected people should get their hands on the public purse. </p>
<p>But ANC politicians who reject this ploy cannot simply dismiss it. The patronage group is trying to exploit the idea of economic change because just about everyone in the ANC – and many people outside it – agree that it is not credible to claim that the economy is now nonracial and inclusive. Their opponents must, therefore, acknowledge that change is needed. But they must try to ensure that it is about including people, not enriching a few.</p>
<p>The stress on “radical economic transformation” – and more militant statements on the economy by ANC politicians such as secretary-general <a href="http://www.iol.co.za/news/politics/anc-shifts-gears-into-radical-socio-economic-transformation-7560267">Gwede Mantashe</a> and parliamentary finance committee chair <a href="http://www.businesslive.co.za/bd/opinion/columnists/2017-01-26-editors-lunchbox-transform-or-else-yunus-carrim-tells-banks/">Yunus Carrim</a> – are part of this attempt to develop a programme for change which is not about giving a free pass to the connected.</p>
<p>This does not necessarily mean that there is always a neat divide between the two change agendas – some policy documents might mix proposals from the both sides. But the attempt to justify patronage has triggered enhanced ANC interest in change.</p>
<h2>More serious than before</h2>
<p>Given this background, the latest version of “radical economic transformation” should be taken more seriously than previous editions. </p>
<p>The patronage group’s opponents need to show that it is possible to achieve economic change which fixes the problem rather than using it as an excuse. So they can’t simply talk about change – they must make it happen. </p>
<p>But are there any signs of attempts to ensure radical change?</p>
<p>The details spelled out in <a href="http://www.iol.co.za/news/politics/anc-shifts-gears-into-radical-socio-economic-transformation-7560267">recent ANC statements</a> provide an answer. They include plans to boost business opportunities in townships and rural areas, and by using “the Constitution, legislation and regulations, licensing, transformation charters, the national budget and procurement, state-owned companies and development finance institutions, as well as government programmes” which, of course, is fairly vague.</p>
<p>The <a href="http://www.gov.za/speeches/president-jacob-zuma-2017-state-nation-address-9-feb-2017-0000">State of the Nation Address</a>, which can presumably be taken as a statement of the government’s intent, ignored the township business proposals and concentrated on tougher competition legislation and a state-owned mining company (a possible gain for the patronage group).</p>
<p>It also emphasised land distribution and using a variety of measures to boost black business: public procurement, legislation to boost black property practitioners, and the black industrialists programme.</p>
<p>How radical these ideas are depends on the beholder. To some lobbies any attempt to interfere with the market is a threat to its survival. But, for those with a greater grasp of reality, the theme seems to be change which goes beyond tinkering with current ways of doing things, but does not seek to tear up the fundamentals which have underpinned policy since 1994. It also seems likely that the proposals are designed for negotiation and are not final decisions.</p>
<p>The patronage lobby’s ideas would, of course, change those fundamentals dramatically. It would tear up many of the controls which protect public money, from rules which award tenders to the cheapest bidder, through to controls on money laundering to the Treasury’s spending safeguards. </p>
<p>Their opponents propose a programme which leaves all of that in place but seeks to nudge the economy in a more inclusive direction.</p>
<p>The land proposals, for example, may use expropriation – which will allow courts to set the price of the land – but, according to land reform minister <a href="https://www.businesslive.co.za/bd/national/2017-02-15-valuer-general-to-determine-land-prices-says-nkwinti/">Gugile Nkwinti</a> will mainly rely on the Valuer-General, a recently created government office which sets the prices of land earmarked for reform. New competition laws may trample on some toes but are hardly radical in a market economy.</p>
<p>This year’s version of “radical economic transformation”, therefore, has more substance than the previous editions. But it is hardly a recipe for a dramatic economic shift.</p>
<p>And, while the content of government proposals has shifted, there are no signs yet that the lack of a strategy to achieve them has been addressed. All of these plans will remain on the drawing board unless ways are found of ensuring that investment not only continues but also grows. That will require a coherent plan to win the support – or at least the compliance – of economic power holders. Until that emerges, “radical economic transformation” will remain the stuff of policy documents rather than concrete action.</p><img src="https://counter.theconversation.com/content/73003/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Steven Friedman does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>In his recent state of the nation address South Africa’s President Jacob Zuma spoke emphatically of “radical economic transformation” causing nationwide debate. What does it really mean?Steven Friedman, Professor of Political Studies, University of JohannesburgLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/695812016-12-01T15:39:35Z2016-12-01T15:39:35ZSouth Africa’s water sector: a case study in state capture<figure><img src="https://images.theconversation.com/files/148252/original/image-20161201-25663-ufw1gc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Children pump water at communal tap in Durban, South Africa. The country is facing a mounting water infrastructure challenge.</span> <span class="attribution"><span class="source">REUTERS/Rogan Ward</span></span></figcaption></figure><p>A lot of what is being presented as radical economic transformation initiatives in South Africa is simply <a href="https://theconversation.com/why-patronage-and-state-capture-spell-trouble-for-south-africa-64704">state capture</a> by a corrupt elite. The water sector provides a lens through which this issue can be viewed in a very practical way. The consequences will be dire if the situation is not addressed.</p>
<p>The minister of water affairs and sanitation <a href="https://www.dwa.gov.za/minister/minProfile.aspx">Nomvula Mokonyane</a>, stands at the centre of the unfolding <a href="http://www.viralbru.com/r26-billion-south-african-water-project-corruption-scandal/">tragedy</a>. Billions of rands are at stake in a story that threatens the lives and livelihoods of all water users.</p>
<p>So, are the controversial activities of some political leaders ensuring that water comes out of the taps in rural villages? Have their decisions contributed to the security of the water supplies that are needed to keep industries working and the economy of the country growing? Is the country making the right investments in its water future? Is there value for money? Is the right infrastructure being built, in the right place, and is it built properly?</p>
<p>At the most basic level, the <a href="http://www.statssa.gov.za/publications/P0318/P03182015.pdf">number of people</a> whose taps no longer provide a reliable water supply grew by almost 2 million between 2011 to 2015. This is a problem particularly in rural areas but it is spreading to urban areas as well. In Mangaung, one of South Africa’s eight metropoles, <a href="http://www.statssa.gov.za/publications/P0318/P03182015.pdf">70%</a> of people questioned, reported water cuts that lasted more than two days in 2015. In most cases, it has been shown that the problem is <a href="https://www.agsa.co.za/Documents/Valueaddingauditreports/Specialauditreports/tabid/291/id/891/Default.aspx">bad management</a> not a shortage of water.</p>
<p>At the other end of the scale, the picture is no better. <a href="http://amabhungane.co.za/article/2016-08-05-mokonyanes-alleged-new-terms-for-lesotho-water-project-cited-as-causing-delays">Expansion</a> of the biggest and most important water supply scheme in the country, the Vaal River System, is more than five years late. </p>
<h2>Destructive political intervention</h2>
<p>The effective functioning of the Vaal system underpins a large part of the country’s economy and around 35% of the population. Its failure would have disastrous consequences for lives and livelihoods and every year’s delay costs at least R500 million.</p>
<p>The main reason for the latest delay is that Mokonyane has spent two years changing the rules and governance of the project. Her stated reasons for doing this include that the changes were part of government’s <a href="https://www.dwa.gov.za/Communications/PressReleases/2016/MS%20-%20Minister%20Mokonyane%20confident%20Lesotho%20Highway%20Water%20Project%20will%20be%20completed%20on%20time.pdf">economic transformation</a> agenda to ensure that a broader array of companies could compete for contracts. </p>
<p>To push through this position, she <a href="http://city-press.news24.com/News/nomvulas-watergate-20160710">fired Dr Zodwa Dlamini</a>, South Africa’s chief delegate in charge of a daily project oversight in Lesotho. She replaced Dlamini with a lawyer with no engineering or water knowledge. </p>
<p>Then she <a href="https://businesstech.co.za/news/government/129644/corruption-seeps-into-south-africas-r26-billion-water-project-report/">cancelled a tender</a> that had already been closed after reportedly meeting with officials of the company that was excluded because it did not have the required expertise. </p>
<h2>More scandals</h2>
<p>In between the township tap and the big dams of Lesotho, there are many more sad stories. Newspaper <a href="http://city-press.news24.com/News/r170m-and-still-no-water-20160314">reports</a> tell of huge contracts given to political friends – R4 billion in Limpopo Province alone. There are many question marks over their performance and Limpopo remains one of the worst performing provinces with 60% of its households suffering long interruptions in supply in 2015.</p>
<p>In October Mokonyane’s department took out full page advertisements <a href="https://www.dwa.gov.za/Communications/PressReleases/2016/MS%20-%20First%20Unqualified%20Audit%20since%202009.pdf">boasting</a> that the Auditor General had given them a “clean audit”. But then in November the Auditor General highlighted the department as one of the <a href="https://www.agsa.co.za/Documents/Auditreports/PFMA20152016.aspx">worst offenders</a> for billions of rands of irregular expenditure. </p>
<p>Mokonyane then claimed that the irregularities were <a href="http://www.infrastructurene.ws/2016/11/21/water-department-justifies-its-irregular-expenditure/">due to drought</a> despite the fact that they occurred after three years of normal to above average rainfall in the province concerned.</p>
<p>Meanwhile, officials in the national government and water professionals have been horrified to learn that, in the Free State, the minister and mayor of Mangaung are pushing ahead with proposals to build a <a href="http://www.news24.com/SouthAfrica/News/r2bn-water-pipeline-planned-for-free-state-20151113">R2 billion pipeline</a> to bring more water to the city from the Gariep Dam on the Orange River. <a href="https://www.dwa.gov.za/Orange/Docs/Great%20Bloem%20Area/Reconciliation%20Strategy.pdf">Technical studies</a> –- carried out by the Mokonyane’s department – show that this is three times more expensive than other alternatives that could meet the city’s needs for the next 20 years. If this project goes ahead, it will reduce funds for water provision in the province by more than a R1 billion.</p>
<h2>Radical transformation</h2>
<p>Mokonyane has <a href="https://www.dwa.gov.za/downloads/MediaProduction/Sannet/Strategic%20Plan%20(Vote%2036)%202015-16%20to%202019-2018-20-21-30/Strategic%20Plan%20(Vote%2036)%202015-16%20to%202019-2018-20-21-30.pdf">justified</a> her actions on the grounds that she is promoting radical economic transformation. But what does that mean and is it true?</p>
<p>In 2015 the handover report of the first <a>National Planning Commission</a> said that radical change was necessary to end poverty and inequality and ensure a prosperous South Africa. </p>
<p>The commission spoke of the need to move away from narrow black economic empowerment benefiting only a few people to more broad-based approaches. The shift emphasised supporting people engaged in productive activities rather than just middlemen. It pointed out that new economic tools would be needed to achieve this. Conventional economic policies would need to be interrogated and support, such as long-term low-income loans, would need to be provided. </p>
<p>It is important to consider decisions that are being taken today and ask whether they are moving the country in this direction.</p>
<p>My contention is that, based on what’s happening in the water sector, they are not. When companies without capabilities are appointed to do jobs, they have two choices. They can appoint others to do the work for them, the traditional middleman approach. Or they will try to do the job themselves, resulting in delays and cost overruns. </p>
<p>Take a large project like the <a href="http://www.engineeringnews.co.za/article/phase-ii-update-polihali-dam-construction-expected-in-2019-2016-07-29">Polihali Dam</a> and tunnels for Lesotho Highlands Phase 2. This is no small job.</p>
<p>The Polihali dam will be 169 metres high, almost as tall as one of Johannesburg’s tallest buildings, the Ponte City. The tunnel, big enough to drive a double decker bus down, will be over 30 kms long. So choosing inexperienced contractors could result in disastrous delays and cost overruns.</p>
<p>If decisions taken in the name of radical transformation put the water supplies to major centres at risk of interruption, economic activity will stagnate or move elsewhere. With it will go the jobs and opportunities to engage more people in the economy. Already, many South African corporations are worrying about the water security of their operations in places like Gauteng.</p>
<h2>Playing into the pockets of the elite</h2>
<p>When money is wasted there will simply be less available to provide services to those who do not yet have them. This will in turn reduce demand for the basic goods and services in house building and construction that should be part of any radical economic transformation.</p>
<p>Mokonyane faces mounting <a href="http://www.timeslive.co.za/politics/2016/11/30/Auditor-General-lays-bare-slew-of-problems-plaguing-water-projects">criticism</a> for her handling of water matters. Her department has reportedly been the subject of <a href="http://amabhungane.co.za/article/2016-08-05-mokonyanes-alleged-new-terms-for-lesotho-water-project-cited-as-causing-delays">investigations</a> by the public protector and the police’s Special Investigating Unit. In response she has <a href="https://www.dwa.gov.za/Communications/PressReleases/2016/MS%20-%20Minister%20of%20Water%20and%20Sanitation,%20Nomvula%20Mokonyane%20on%20the%20Appointment%20of%20a%20Task%20Team%20to%20Review%20Procurement%20Processes.pdf">appointed her own task team led by a lawyer to investigate</a>. Whether its work will be independent is highly questionable. </p>
<p>The view through the lens of water is thus clear. The shenanigans in the water sector have little to do with radical economic transformation. They are more about the ongoing enrichment of a new elite.</p><img src="https://counter.theconversation.com/content/69581/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Mike Muller receives funding from Water Research Commission and UNU-WIDER</span></em></p>Massive state capture activity is taking place in the South African water sector under the guise of radical economic transformation, threatening financial sustainability and water supply.Mike Muller, Visiting Adjunct Professor, University of the WitwatersrandLicensed as Creative Commons – attribution, no derivatives.