BUSINESS MAVERICK 168
The ANC, a tax evader? Massive debt, unpaid salaries, dry donation taps
The ANC is reportedly facing a smothering debt load of more than R200-million; it owes more than R100-million to the South African Revenue Service (Sars), and is heading into the third month of not paying salaries to its workers
First published in the Daily Maverick 168 weekly newspaper.
If the ANC were a person, it would be forced either to declare bankruptcy and undergo debt counselling or be in prison for failing to take demonstrable steps to turn its financial crisis around.
Although the true financial position of the ANC is not known since its books are not open to the public or even audited, the governing party is facing troubles on multiple fronts.
The ANC is reportedly facing a smothering debt load of more than R200-million; it owes more than R100-million to the South African Revenue Service (Sars); and is heading into the third month of not paying salaries to its workers.
The last problem has come to a head as disgruntled ANC workers planned to, but eventually didn’t, lay charges of fraud, corruption and theft against the party’s head honchos. The allegations against the ANC’s top five (excluding suspended Secretary-General Ace Magashule) about the party’s financial mess are damaging and are laid bare in an unsigned affidavit drafted by workers.
The workers have accused the ANC’s top five of deducting their monthly salaries for Unemployment Insurance Fund (UIF) benefits and Sars pay-as-you-earn (PAYE) tax over the past three years (from January 2018 to August 2021), but failed to hand over the deducted funds to the two institutions. The ANC has allegedly done the same when deductions are made from workers’ salaries for provident fund and medical aid benefits.
“The practices [of not paying taxes, medical aid, UIF and provident fund benefits] … are widespread and have taken place on a massive and nationwide scale over a substantially long period, amounting to hundreds of millions of rands, if not more,” reads the affidavit that would have formed the basis for criminal charges that would have been laid against the party’s top five. The workers said ANC senior officials have admitted to the wrongdoing of deducting salaries and pleaded with them not to refer the matter to the police.
The ANC and its treasurer-general, Paul Mashatile, were not available to comment to DM168 about the allegations proffered by its workers, who have also gone into detail about the hardships they face.
“The [number of] victims have run into hundreds or thousands of people over the years. Some of the victims have since passed on and thereby created further victims in the form of their family members and/or dependants who have had to incur unnecessary and unanticipated hospitalisation, funeral and other costs when they shockingly discovered at the time of their bereavement that their departed loved ones were not entitled to the benefits, which the accused persons [the ANC top five] had falsely misrepresented to be due to them.”
Deducting from workers’ salaries and not handing the funds over to relevant authorities is illegal, and the pernicious behaviour carries sanctions, including a criminal sentence or an organisation being slapped with a large bill for arrears.
In the private sector, business owners have been prosecuted for not paying over PAYE, UIF and provident fund deductions. Beyond the ANC, state-owned entities including SAA, SA Express and Denel have, at some point, failed to pay tax, UIF and provident fund benefits, but faced no legal consequences. Political analyst Moeletsi Mbeki said the ANC becoming a tax evader is a “visible sign of its failure to govern”. “In a way, it says a lot about the incompetence of the ANC. Not paying tax tells us that the ANC is above the law. It doesn’t have to follow the laws of SA but requires the public to do so.”
The ANC has a long history of cash problems.
Former ANC treasurer-general Zweli Mkhize presented a financial report to the Nasrec elective conference in 2017, showing that the party was sailing close to the wind at the time. The report, first reported on by City Press, indicated that the ANC was R215-million in debt and had a deficit of R47-million (the amount that its expenses exceed revenue by) – rendering the party insolvent.
Like other political parties, the ANC generates its revenue mostly from private donations. Between 2013 and 2017, the ANC collected R2.6-billion in donations – funds that were spent on funding national and municipal election campaigns (R750-million), honouring debt payments and paying staff (about 30% of the total donations went to the party’s salary bill).
The party’s finances are still in the red, three years after Mkhize was replaced by Mashatile.
For its cash crunch, the ANC has blamed several factors: Covid-19 and an economy in the doldrums, and donors who fear exposure owing to the Political Party Funding Act, which requires every donation above R100,000 to be disclosed and caps the annual contribution of donors at R15-million. The ANC’s reputation has also taken a further knock owing to corruption over Covid-19 personal protective equipment, making donors nervous about being associated with the party.
Political analyst Dr Ralph Mathekga said the reasons for the ANC’s cash problems go further, adding that how the party receives funding from its donors doesn’t inherently allow for proper financial management and accountability. “You will be shocked at how the ANC is run. If they don’t have money for salaries, a comrade will directly approach a donor and get millions of rands. This process is run outside of formal Luthuli House structures,” said Mathekga.
The Mail & Guardian recently reported that Mashatile and ANC Deputy President David Mabuza received at least $2-million from donors but the money failed to make it into the Luthuli House bank account. ANC President Cyril Ramaphosa is reportedly vexed by this and has refused to help the party with its current funding crisis.
Mathekga said the ANC’s financial problems give further evidence that it doesn’t have the legitimacy to govern the country’s finances when it fails to efficiently run its own.
“The ANC cannot even do the basics of disciplining its own members to make sure they follow their own rules. The party is already crumbling, and its problems are structural. Even if the ANC raises funds through crowdfunding, its problems will still be there because it has failed to modernise and reform itself institutionally.”
For Ongama Mtimka, a political analyst, the ANC’s financial problems signal the imminent death of the party ahead of the upcoming local government elections. “The party cannot be saved from its death. All that matters is to control the manner of its death so that whoever is in control of the party is in a position to rebuild it in the way that they want. The ANC that we know, one that has emerged post the 1994 era, its time is up. If not, its crisis will show up in huge electoral losses in the short term or a financial crisis that pushes it into extinction.” DM168
This story first appeared in our weekly Daily Maverick 168 newspaper which is available for R25 at Pick n Pay, Exclusive Books and airport bookstores. For your nearest stockist, please click here.