Joburg’s financial catastrophe

Added: 2026-05-07

[00:00:12]Good afternoon, ladies and gentlemen, and welcome to another episode of the Daily Friend Show. I'm your host, Nicholas Larma. Today, joined by Mr. Chris Hutton. Let's get into our first news story of today. Today we're going to be speaking a bit about the city of Joberg and its large very large financial problems. So a letter from within the city administration addressed to Mayor Dada Council uh Dada Morero has been leaked to the public. The letter is dated the 23rd of April 2026. And I'm going to read some bits from this letter written to the mayor of Joberg by the uh finance ministry. Uh the minister um you know dear councelor Morero transgression of the budget laws and associated regulatory instruments by the city of Johannesburg metropolitan municipality.

[00:01:07]Recently I have observed a series of violations of legislative of various legislative and regulatory compliance requirements under the municipal financial management act 2003 act number 56 of 2003 that suggests a deterioration in the city's governance and overall financial health. It goes on to say the adjustment budget recently passed for the city was assessed by national treasury to be unfunded revenue unfunded revenue collection was overstated while expenditure was understated. The understating of expenditure will mostly result in unauthorized expenditure by June 2026 which will put further financial strain on the municipality.

[00:01:46]It also uh uh goes after the city for failure to comply with the requirements of the municipal regulations on municipal standard charter accounts.

[00:01:54]Although the city has demonstrated improvement uh to this effect um data strings and submissions and alignment of data between the city's financial systems and council proof document the there are still um challenges delays in the implementation of the road map set out by treasury and non-functionality of key modules remains a serious concern.

[00:02:15]The national treasury notes with concern the continued non-compliance of the city with financial regulations. The city remains unable to transact and report fully through a uh regulatory compliant financial management system as required by the regulatory framework.

[00:02:33]Also flagged in this letter, failure to prevent and address unauthorized irregular, fruitless and wasteful expenditure. Previously, Treasury has flagged that Johannesburg has 22.2 two billion rand in irregular expenditure and over 705 million rand in fruitless and wasteful expenditure.

[00:02:52]Uh Gonguana in this letter goes on to give Morera 14 days from the date. So I think what that would have passed presumably by now um if this was set on the 23rd of April to explain how the city plans to recoup the uh over 22 billion rand in unauthorized irregular fruitless and wasteful expenditure and a concrete plan to fix Joberg's finances.

[00:03:16]Uh the letter from Treasury also attacks the municipality for failing to pay creditors within 30 days of the municipal financial in terms of the municipal financial management act. Um this is required by the municipal financial management act that all creditors be paid within 30 days.

[00:03:32]However, as the ministry notes, the outstanding amount owed to creditors increased from 17 billion in 2022 2023 financial year to 25 billion in 2024 2025 financial year. Whereas the city's cash and cash equivalent of just under four billion rand is insufficient to repay the outstanding creditors of 25 billion rand. This is a marker of severe financial distress indicating that the city does not have liquidity required to pay its creditors. And lastly, the letter really hammers the city on its recent um what was described by Helenzilla and the DA as essentially a bribe to the South African Municipal Workers Union Samu. a wage increase which amounts to 10 billion rand over the next two years. Uh the finance ministry says that given the city is in financial distress, it is unclear how it intends to fund these salary increases um over the medium term. So Johannesburg has a national budget of sorry a budget overall of about 90 billion rand and this relies a lot on supplements by the national treasury. This letter suggests that the national government is considering um interfering in some way perhaps in the administration of the city of Johannesburg or possibly reducing or suspending payments until the financial situation is uh brought under control. And that of course means that Joberg is headed for a serious financial crisis.

[00:05:03]Chris uh I'm sure no one in the in the ANC wanted this letter to go public. uh and uh uh but for the finance minister to be writing to a mayor who belongs to his political party um to basically say look this municipality is a total crisis this is uh shall we say not so good your take on all of this I'm really looking forward to premier pa lufi's reaction and how he's going to interpret this and how he's going to try and maybe justify or define exactly what's been going on because a lot of this is also under his leadership, under his management, under his direction for many years now, not only the last two or three, but an even longer time in different other portfolio. So, I'm looking forward to to that particular sort of wedge point or tension point between the Khoing ANC on a city and provincial level and then the national ANC. Um, and as we will continue to highlight in the leadup to the next local government elections on the 4th of November, the ANC and and Mayor Morero, I mean, they they formed this this bomb squad uh recently that they wanted to address, you know, this task team to address the core issues in Johannesburg.

[00:06:16]Meanwhile, these kinds of bombs keep dropping on the ANC in the leadup to the elections and I don't see any of them diffusing them.

[00:06:22]>> Just to update, I believe that the bomb squad isn't even talking to the city manager because they're all on such bad terms. We talked about that a while ago.

[00:06:29]So even the much vaunted bomb squad hasn't been able to, you know, properly organize meetings. Never mind.

[00:06:36]>> Never mind diffused bombs. Yeah.

[00:06:39]>> So I mean it's it's indicative of years of the wrong decisions on a very basic level, but also years of corrupt and wasteful decisions um irregular decisions that are now coming home to roost. Unfortunately for the country's most important uh economic from an economic point of view the most important metro uh from a population growth point of view Johannesburg and Kha if you got and Johannesburg growing I mean the effect it would have on the national economy is I think would be quite transformative in the most positive sense of of that term of that word. So it does indicate the concern especially from national treasury um that they are taking these kinds of steps. Whether this results in any kind of accountability and change is a different matter entirely. But at least maybe the kind of political competition we're seeing the pressure of the local government elections it's forcing the hand more and more of different national departments to at least consider some of these steps where perhaps beforehand they wouldn't have even thought about it because the NC was always guaranteed above 50% quite easily. So perhaps we'll see more of this going forward. I do think in and of itself is a good sign.

[00:07:47]Now the karate kind of action needs to follow. Maybe just one last point to highlight from the letter. I thought the the point around the um the agreement with with Samu where Minister Goranguano goes on to to direct to Mayor Morero, you are hereby directed to stop proceeding with the imple implementation of this illegally signed agreement that has the potential to destroy the sustain sustainability of the city of Johannesburg beyond this term of office as well as the negative impact on the national economy at large. I mean that paints it in very stark terms. Um and sorry just the very last point on this in the in the local government race just manner from heaven for the polit opposition political parties.

[00:08:30]Yeah, it's it is it is exactly because uh for example that the DA opposed this in in council uh the wage increase and there was a big fight over it and actually initially I believe the EFF and and uh action I think did not vote for it but that was due to other frustrations they had with ANC but I think one of the politically deadly things at the moment here is that you know we don't have a majority ANC government in Johannesburg we have this coalition which means that the political fallout from this I think spreads beyond the ANC right the the EFF is going to have a difficult time trying to claim that it can run the city properly if this is also attached to it um likewise action in their sort of kind of sort of what's it supply and uh agreement with with you know coalition that's not a coalition with the ANC is also going to get caught by some of this contamination now you know some of those parties voters is this is not like their top issue. They'll just be like, "Oh, well, you know, national government must just fill the hole. This is just what a progressive city needs in order to fill out his things, whatever." But I think persuadable voters on the margins, people who are considering defecting from the ANC um because they don't like the state of governance will look around and say, "Well, you know, what are the alternatives?" and the DA has a strong ability to make the case for itself here and say, "Well, look, we've got a coalition government and that's the most likely outcome from this election. Uh, unless you get behind us and give us a majority," which is what Helen is campaigning for. Um, will they get that?

[00:10:07]I think it's still a long shot, but you know, this only adds fuel to the fire.

[00:10:10]And it's it's been interesting how the political pressure I think has worked in Johannesburg because it has been kind of remarkable to me that it really seems as though the the governing coalition Johannesburg has taken very few steps to try and write the ship in a real way despite the fact that they're staring down the barrel of a very difficult election.

[00:10:31]And I'm not entirely sure why that is. I think some of it is that the ANC has been consumed by an internal factional battle. Some of it is uh just a kind of I think an attempt to get what resources can be gotten. Um and there's been fighting between the ANC and the EFF in particular uh over over who gets what department. So this is this is a big mess um I think for that governing coalition and just as you say manner from heaven for opposition parties but particularly the DA which which I think um is very lucky to not be included in any sort of coalition agreement here.

[00:11:08]But this does mean that if we do get some sort of new government in Johannesburg, uh you know, yes, I'm sure there's many things that are currently having money spent on them that can be reduced. Um but the point is the city is not going to have a lot of cash to start trying to fix problems with and that is uh also going to be a bit of a problem. Any any final thoughts on this one?

[00:11:32]>> Yeah, I think your your last point is very well made. the I mean there's going to have to I'm sure that's already part of plans but you have to prioritize you really have to on things like infrastructure um and maintenance there are never mind never new infrastructure but just water reservoirs dams electricity supply because that kind of thing in turn then helps your revenue side um if you can build up that kind of reliability and that service provision uh waste management all of that sort of thing so there really needs to be a sort of you know p scaling back on all the grand plans hands of bureaucrats and politicians of that governments and cities need to provide all sorts of things. If you just can go back to sort of creating that kind of enabling environment at a very basic level that can help uh from the sort of finance side but also just from the sort of a future perception point of view um because if you don't start to shift some of those you know levers I guess it just goes further further downwards. Um it's it's in such a vicious cycle at the moment. If you look at just the debt to revenue sort of calculation for Johannesburg where as that letter highlighted if you look at for example how the city owes 25 billion just over 25 billion rand while only having cash in hand of 3.9 billion you've got to start somewhere with that.

[00:12:52]>> Yeah. Now I I think I think what's clear is that the next government that's formed after the local government elections in Johannesburg needs to and this is an absolute priority. It can't make incremental changes. Um the city's infrastructure and systems are in such a disastrous state. They need kind of major major reforms. You're going to have to do big stuff to turn around everything from procurement to the billing system to um the wage agreements. And that's going to require a politically stable coalition. So, if we get an unstable political coalition, which is still very possible in Johannesburg, in fact, probably the most likely outcome, uh it's going to, I think, unfortunately, get worse. So, we'll have to see how things go, but this is uh not a great sign for for Joe B's prospects over the next couple of years.

[00:13:42]Okay. Um let us talk about the national health insurance. So the national health insurance is now facing this is passed by the by the the ANC while it still had its majority in parliament. It then went to the president and was signed into law just before the election and uh it's not been implemented yet because well there isn't the money for it and Treasury has not allocated a lot of money to it opposing it pretty strongly. Um that being said, it is still being challenged in court by a variety of stakeholders and some of those challenges are going before the constitutional court. Now in response to this, the ANC has issued a statement defending the National Health Insurance and I want to read bits from this statement.

[00:14:31]The NC National Congress notes the proceedings before the constitutional court concerning legal challenges to the National Health Insurance Act. At the heart of this matter lies a fundamental constitutional question. Whether the right to of access to health care as enshrined in section 27 of the constitution should remain dependent on income or whether it must be progressively realized as a universal entitlement for all. Section 27 is unequivocal that everyone has the right to access healthcare services and that the state must take responsible legislative and other measures within its available resources to achieve progressive realization of this right.

[00:15:05]The National Health Insurance Act represents a decisive and revolutionary step in giving practical expression to this constitutional mandate. It affirms a society in which healthcare is not a commodity for sale to the highest bidder, but a public good anchored in equality, solidarity, and human dignity.

[00:15:22]In this context, the ANC views the NHI as a historical instrument to dismantle the entrenched inequalities that continue to define South Africa's health system. More than three decades into democracy, access to quality healthcare remains structurally determined by socioeconomic status. This dual system, one for the affluent and another for the majority, stands in direct contradiction of to the values of equality and dignity that the constitution seeks to entrench.

[00:15:46]The NHI seeks to correct this historical distortion by pooling the nation's resources to ensure universal and equitable access to the quality of healthcare services. The ANC holds the convict this conviction based on the democracy that has been built from 1994 to date that any individual, organization, business sector, political party or interest group that obstructs, manipulates or distorts constitutional processes of policymaking and lawmaking commits a constitutional and legal transgression. Those who oppose the NHI, including through legal challenges before the constitutional court, are in effect seeking to pro preserve a system that reproduces inequality and delays the full realization of constitutional rights. While often presented in technical or legal terms, such opposition has profound social consequences. It risks entrenching a reality in which dignity is conditional and access to healthcare is determined by wealth rather than need. Beneath these objections lies a deeper material reality. NHI challenges entrenched entrenches privilege. It disrupts a system in it disrupts a system in which quality healthcare is effectively rationed by income where private hospital groups and medical aid schemes thrive alongside a chronically underresourced public health system that serves the majority. Resistance to the NHI is therefore not only about constitutional interpretation but also about the defense of privilege, structural advantage, and historic inequality.

[00:17:06]Now, this is a great statement if you are some kind of uh well-meaning activist lefty NGO is not such a great statement when you have been running the country for 30 years. Um, and that's kind of what really strikes me, Chris, about this is, you know, firstly, I mean, there's we can also get on to this about how they insinuate that you are committing a constitutional transgression by even opposing NHI, but let's put that to the side for a second.

[00:17:34]um that uh you know they talk about the chronically underfunded national health underresourced public health system and as a public health system where the the poor continue to suffer and sort of like hang on a minute.

[00:17:52]This is the system you run. This is the system that you have full control over that you pour huge amounts of the nation's wealth into and that under your watch has been looted numerous times in numerous places by various criminal uh gangs and incentives. And instead of addressing any of the concerns with how the public health care system is is run or how NHI won't actually fix any of these problems, instead we get this long grandstanding moralizing, you know, from the pulpit. Oh, you just want to protect your privilege, you meanisies. I mean, they don't they sort of insinuate kind of a racial aspect to this, but I think they don't they didn't actually mention it, which is, I guess, refreshing, but still. Um, Chris, what do you make of this?

[00:18:38]Yeah. So, a few things. Um, South Africa spends between 8.5 and 9% of GDP on on healthcare. That's high by international standards. That's I mean that's that's well above World Health Organization guidelines. So the the issue isn't a lack of spending. The issue is the outcomes. Um which as we well know due to a raft of ideological and policy and legislative choices over the last three decades. The public health care system despite that large amount of spending from the public purse doesn't result in higher quality health outcomes for the majority of citizens who who use those services. Um so you don't need more funding. You already spend a lot of your GDP on public healthare. You just need to make sure that it works as it should.

[00:19:26]The NHI even if you're the most well-intentioned from the ANC's point of view or others in the department of health like Dr. and Nicholas Crisp, if you're the most well-intentioned, the systems in place in the NHI to centralize public and private healthcare funding in one pool to have the minister have the power to attend to to appoint all the members of the NHI board. All those incentives aren't geared towards reforms. It's geared towards pooling more resources and the incentives are there to make sure that those who have the political connections get the contracts um and all that kind of thing.

[00:20:00]Not that it is around actual service delivery. Um, second major point, last year South African GDP per capita was lower than it was in 2007208.

[00:20:11]I mean that's a macroeconomic reality, a consequence of the ANC's policy. So if we had an economy growing between 4% to 7%. So if we bounce back from the global financial crisis like we should have done if we made the right kind of policy choices before that, more South Africans would have disposable income to spend on private healthcare options. So that that's an indicative >> lower tax revenue.

[00:20:32]>> Yeah, 100%. So you could then fund possibly more options for lower lower cost benefits. And just the last major point on that, the low lowcost benefit options and other reforms uh advised by the health market inquiry years ago that that's always been there. It's been sitting there, but the government hasn't implemented on the public and private side. I don't think anyone is saying that they're that reforms aren't needed in the private healthcare sector. But you don't need an NHI fund to do that.

[00:21:00]You don't need to appeal to moral, you know, flights of fantasy, all these kinds of things to instead of doing the hard work on a day-to-day basis to make sure that hospitals and clinics work like they should, that doctors and nurses get the support that they need, that they are incentivized to to deliver good services, that that products, um, all sorts of medical equipment are procured on a value for money basis and not again on a on a basis that rewards political connections. all of this kind of thing, you know, these statements by the ANC, it really does seek to to hide behind, you know, sort of a moral shield. Um, and just sorry, a very last point on that moral aspect.

[00:21:37]When the ANC talks about a right to healthare, if you say you have a right to something that has to be produced, are you then also implying that you have a right to someone else's time, someone else's resources, someone else's skills that has to go into producing that? So your medical professionals, your nurses, your doctors, um all sorts of people working in that field, they need to produce that. Do you have a right to that? No, you need to pay for that. I don't think that's a moral argument. Say you have a right to someone else's labor.

[00:22:06]So even taking it from the point of view of our constitution, we look at what the practical effects of the uh of what this policy would be. And the practical effects of of of national health insurance are that it would make health quality worse for millions of people, possibly the majority. Um, in fact, I think the benefits from the system would be minuscule because of how much as you as you said or how much money is just wasted in the public system already.

[00:22:39]Pouring more money into that is not really going to do much to turn that around. There are only two ways to actually um fulfill the promise of of a better life for South Africans um envisioned in our constitution. The one is to grow the economy. Um create uh uh deregulate as you say the the the financial medical insurance uh medical insurance industry so that lower cost options can be made available to people um and uh allow the individual citizens uh the space to be able to access health care that they can pay for that they choose. Maybe you can subsidize that.

[00:23:18]That's one way of fixing things. The other way of fixing things is to try and improve the value for money and quality of our public healthare system. As you say, we spend this large percentage of our GDP on it. So, it really is about that management. Those are the two options. NHI does neither of those things. It doesn't. It destroys the private healthare system and it just pours more money on top of essentially what is already a giant tire of of uh of inefficiency um in the public healthare system. And so if you take this uh NC statement on its merits that it's seeking to enact a vision envisioned by our constitution, um I think the NHI actually runs counter to that promise.

[00:23:58]It is going to make healthcare worse for South Africans, not better. And that's why this this false dichotomy of oh it's for the poor against the rich I think is is ridiculous because this is going to do very little to help the poor while enriching a small group of uh politically connected cronies who are going to have a whole bunch of resources now to access and and and and uh steal from unfortunately. Um anything to add Chris before we move on?

[00:24:26]>> Just that yeah the NHI I mean it's concentration risk 101. So we've seen the consequences on the economy from from ESCOM and from transnet.

[00:24:35]There is no there's no moral or practical evidence to say not that it'll be perfect if you have a more competitive private and public healthare system. There will be abuses you follow the process etc. It won't be perfect but you just you disperse the risk a lot more. when you've got the NHI, you concentrate everything in that one point and maybe you'll have a very well-meaning minister or director of the national health department and your provincial departments who in the NHI would effectively be wiped out. They need to disperse the money that they get from national um in this NHI setup. They won't have a role to play anymore. So, you just you give every reason and every incentive for money to be wasted and abused. There's no if you really are for quality health care and access to that for South Africans, you can't be for the NHR. It's just Yeah.

[00:25:22]>> Yeah. Exactly.

[00:25:24]Okay. Last story for today. Uh those of you who follow the news will know that um the Middle East is traditionally not a place of peace and harmony, but more so in recent years, particularly when it comes to maritime traffic in the area.

[00:25:40]Currently the straits of Hormuz uh is blocked by a a Iranian blockade for and an American counter blockade. Um there are also fears and there have been attacks over the last few years in the uh Gulf of Aiden and the the bar al-Mande I think it's called that straight between Africa and Arabia.

[00:25:58]Um and now there's a increase in Somali piracy which uh was largely wiped out but appears to be creeping back in with several attacks in recent years uh in recent months. um on shipping. So many shipping companies that need to get goods from Asia to Europe are now looking at alternatives. Uh and one of those alternative paths is around the southern coast of Africa.

[00:26:23]Not only is no one trying to prevent you to pass by the southern coast of Africa, there's aren't really pirates. There aren't really um hostile warships or missiles pointing at you. It's also much more difficult to do that just because it's not a narrow straight. And so the potential exists for a major windfall to fall to African ports. And uh there's been some reporting in the media about just this exact uh uh phenomenon. Um traffic around uh the southern point of Africa has almost doubled in the past few months, increasing by 90%.

[00:26:59]However, almost no African ports have really benefited um with major problems, weather disruptions, congestion, bad competitiveness, preventing ships uh pulling in for port uh to to refuel, resupply, do all those maintenance, that kind of stuff around Durban and Cape Town. Um the only ports that seem to have benefited are Port Louie in Maitius uh as well as Luditz and Walver Bay in Namibia. Um which have which have done all right and then also some some offshore uh platforms in in West Africa.

[00:27:33]Uh Chris, you know, South Africa seems like it's going to be sitting on an increasingly important waterway as the sewers and hormuz both get uh disrupted.

[00:27:44]um what should we be doing to take advantage of that?

[00:27:48]>> Yeah, there's also concerns around the Panama Canal and water levels, all that kind of thing. If those three at least are closed, then the Cape does become the most important route um along with the Strait of Mala in Southeast Asia. Um I mean despite my ranting about this for many many years of Africa's ports are not up to global standards like they they should be and that should be invested in before this kind of thing happens so that you build a reputation for if I if you excuse the pun a sort of safe port a port of good standing safe haven kind of thing where doing business with you is that kind of reliable that transparent the processes are easy to follow the documentation all of that kind of thing you've got enough basic basically from a a birth's point of view, enough cranes, um enough space for trucks to come in, enough brackets to put those containers on the trucks, all that sort of thing. Um so that sort of thing needs to be invested in long-term.

[00:28:45]Namibia and Mosmbique have been doing well in that regard the last 5 years or so to really build up their reputation and taking a bit of South Africa's sort of share of that regional maritime trade that we we took for granted and we thought would always come here um especially to Durban and to Richard's Bay. So yeah, it really does reinforce the case for introducing competition in our ports, not only uh sort of in the ports themselves, but you could even say between peers in ports so that one peer has to compete with the other um to open up to that kind of investment and bidding from the private sector. Um there is, you know, sensibly this operational um investment um by a company based in the Philippines, a Durban Pier 2. We're yet to see the sort of benefits thereof. There was of course legal action, all that kind of thing. So maybe you'll see the benefit of that coming. Uh but also maybe second to that and to to borrow from a work by our colleague Ricardo Tesira uh just on maritime security and the sort of basic inability of our our army, navy, air force to protect shipping from piracy around our coastline given that we have do we have even four frigots if that many operational that can help protect shipping around our coastline. If you don't have that kind of thing in place, even if global trade does shift as it might be doing now, you don't really benefit from that uh because you're just not able to guarantee anything from a security point of view. Uh maybe just the last point, you know, a lot of the shipping that is rerouted around the Cape, those those goods and materials aren't necessarily destined for South Africa, but we can benefit from a uh sort of birthing ships point of view, a maintenance uh refueling, that kind of thing can help. And then over time you build up the sort of uh the trade hub that South Africa should be. But that kind of thing does take time and this reinforces that point that you you should be doing this work when things are are quieter and safer and that you benefit then when when globally things are a bit more unstable.

[00:30:46]I think this is another reminder that uh as much as geopolitical tensions in the world are definitely going to cause problems for South Africa that they also will create opportunities for South Africa considering that we are quite far removed from many of the trouble spots and that suggests to me that even if the world is going through a difficult period um if South Africa plays its cards right it will be able to benefit in some ways. Anyway, thank you for listening to the show. We hope you found it interesting. Please do like the video if you like it. Please do subscribe to our YouTube channel. Please do leave us reviews if you're listening to us on a podcast app. We shall see you all tomorrow on the Daily Friend show.

[00:31:23]Cheers everyone and have a wonderful day. Bye-bye.

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