ANC factions at each other's throats as bankruptcy looms for Joburg

This article was first published by The Common Sense.Key topics:Treasury warns Joburg over illegal R10bn wage dealGodongwana flags budget failures and bankruptcy risksANC-EFF coalition blamed for Johannesburg financial chaos.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox every morning on weekdays. Register here.Support South Africa's bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..From The Common Sense.Cracks are emerging in the African National Congress (ANC) ahead of the 4 November local government elections (LGE), with Finance Minister Enoch Godongwana severely reprimanding Dada Morero, the mayor of Johannesburg, for agreeing to an unsustainable multi-year wage deal.Godongwana sent a letter to Morero, in his capacity as the mayor of Johannesburg, saying that Morero and the city had transgressed a number of budget laws and regulatory instruments, under the Municipal Finance Management Act (MFMA).In the letter Godongwana said that there were potential risks in the recently passed adjustment budget, including failing to meet revenue targets and over-expenditure.Godongwana also flagged an agreement signed between the city and the South African Municipal Workers’ Union (SAMWU) in November last year, which committed the city to paying over R10 billion in salary increases over the next two years..Read more:.EWC, BEE setting up Godongwana and GNU for failure – IRR.Godongwana said: “Given that the City is in financial distress, it is unclear how it intends to fund these salary increases over the [Medium Term Revenue and Expenditure Framework]. Taking into cognisance the current state of finances using the creditors and cash equivalents as a matrix, you have committed the City into a financial obligation that is not possible to fulfil. Of concern is that this decision is a direct transgression of MFMA and budget and reporting regulations. You are requested to indicate what measures will be implemented and how this violation will be arrested or reversed.“You are hereby directed to stop proceeding with the implementation of this illegally signed agreement that has the potential to destroy the sustainability of the City of Johannesburg beyond this term of office as well as the negative impact on the national economy at large. Secondly, not only is your adjustments budget not funded in terms of Section 18 of the MFMA, but you very well know the City cannot afford this agreement.”Godongwana warned that should the city not rectify the situation the National Treasury could withhold R8 billion in funding.Helen Zille, the Democratic Alliance (DA) candidate for mayor in Johannesburg, says the letter confirms that Johannesburg is effectively bankrupt. She said: “In all my years in politics, I have never seen a letter quite this forthright or this blunt – particularly in warning of such devastating consequences if the stipulated actions are not taken.”This letter is the latest salvo in the developing civil war within the ANC between factions that are opposed to the Government of National Unity (GNU) and those that are opposed to it.The ANC in Gauteng has been sceptical of the GNU, and refused to form a government with the DA in the province after the 2024 election, initially opting for a minority government, with the support of some smaller parties. Since then, the ANC in the province has brought in the Economic Freedom Fighters (EFF), giving the governing provincial coalition a majority, and giving the EFF the post of provincial finance minister.Something similar may be brewing in the Northern Cape, where the ANC governs in a coalition with the Freedom Front Plus. However, in recent weeks the ANC and EFF have formed a coalition to govern Sol Plaatje (Kimberley), the biggest city in the province, which The Common Sense understands could be a prelude to a similar governing arrangement at provincial level.The financial chaos in Johannesburg also shows what could have happened in South Africa had a GNU without the DA been formed..Read more:.ANC-EFF coalition: A doomsday scenario for SA’s future – Corrigan.The current coalition in Johannesburg, made up primarily of the ANC, EFF, and Patriotic Alliance, has been absurdly profligate with ratepayers’ money and it would be naïve to think that something similar would not have happened had a similar coalition come to power at a national level.If such a potential coalition had come to power, with no thought to sensible and sustainable financial management, the rand could have been trading at close to R25 or R30 for a dollar, with diesel potentially reaching levels of close to R50 per litre..This article was first published by The Common Sense and is republished with permission.

ANC factions at each other's throats as bankruptcy looms for Joburg

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