Finance 101 for government

The DA released evidence of major financial mismanagement in ANC-run metros.  I don’t know what is “major”, but they must include the R28 million wasted on the Cape Town Cup flop in their jewel-in-the-crown, Cape Town.  The auditor-general told me they are concerned and will investigate it as part their annual audit.

The DA should include, as an example of how not to do things, throwing good money after bad trying to resurrect the Cape Town Stadium, with the speculative and stupid business plan option they intend pushing through. 

It appears South Africa’s politicians and bureaucrats – DA included – are financially inept and cannot manage public money.  To this end, I thought it might be useful to have informal and irregular Finance 101 lessons.  Finance for Dummies or The Idiot’s Guide to Finance is apt here, but these titles are copyrighted, and are intended for people committed to self-help.  So I’ll formally call it 'Lessons in Finance for the Financially Challenged Public Sector Officer'.

The lessons shall be in easy-to-digest bites for our challenged officials.  No exams are necessary and the lessons can be absorbed at their own pace of comprehension: the course assumes slow learners.  My qualifications to offer it as a free public service are I can read Wikipedia and commonsense, the latter quality our hubristically-inclined officers lack. 

I covered Lesson 1 already (see my recent blog "Cape Town Stadium, the white elephant we can't afford"): It’s stupid to waste money on a dead asset.  Moving on, today we have Lesson 2: Buy low and sell high: 

Energy Minister Tina Joemat-Pettersson and Strategic Fuel Fund (SFF) chief executive Sibusiso Gamede ignored, or were ignorant of, this paramount law/lesson of finance.  In December 2015 SFF sold 10 million barrels of South Africa’s fuel reserves for $28 a barrel (to an ANC-linked company) when the international oil price had reached its lowest and could only go up.  Oil is now $50 a barrel, and the country will experience a loss of hundreds of millions of rands replacing the sold reserve (the buyer will show a tidy profit).  It’s a huge no-no to buy high and sell low.

Lesson 3: In times of austerity, hunker down and drastically reduce spending and debt. The ratings agencies – if you will, external examiners of the Advanced Finance course – are particularly strict about this rule.  And Lesson 4: Avoid imported and unnecessary consumables:   

The president’s wives spent almost R9 million on imported, luxury cars (their “old” cars are only two years old), and ironically Weekend Finance Minister Des van Rooyen has spent R500 000 on 5-star hotel accommodation. 

(Case study: Mad Max: Fury Road’s Immortan Joe, his five wives, numerous cars and War Boys who will die for him.  Joe’s accountant, The People Eater, complains how much his war with Max and Imperator Furiosa is costing them.  In the end, Joe lost it all. Quiz question: Discuss the relevance of the Fury Road metaphor to SA.)

 “There is no such thing as a bad pupil, only a bad teacher”.  Unfortunately, South Africa’s finance controller and professor, the finance minister, may be - is probably - very bad at his job (see “Gordhan shows arrogance”, May 25). The external examiners S&P rated him on June 3.

The above instances of systemic and complete disregard for the rules of finance show how badly public officers need Finance 101.  I recommend they also take Ethics and Governance 101, which comes down to: Don’t take money or favours you have not earned yourself.