Construction crackdown in one South African province

South Africa’s infrastructure department is halting some projects in one of its most financially troubled provinces to enforce payment by other government agencies.

The Department of Public Works in KwaZulu-Natal, the second–most populous province, said it has stopped projects for the region’s education department.  

There is a “growing volume of debt” owed to the provincial department that hinders it from fulfilling other obligations, it said in a statement.

The action comes at a time when the inability — or reluctance — of government departments and municipalities to honour their debts is undermining economic activity and the viability of state utilities. 

Coalition governments at national and provincial levels — formed after last May’s elections cost the African National Congress its majorities in many regions — have vowed to put an end to non-payment.

On April 7, the province’s public-works unit told service contractors it was halting education-related projects because of non-payment of debts, according to a notice seen by Bloomberg and confirmed by officials in the two departments. 

For years, companies including state entities have struggled to get government departments to pay their debts. That’s made many of the service providers financially unviable. 

State power utility Eskom alone is owed close to R100 billion by municipalities and has threatened to cut off power to enforce payment. So far, it’s had limited success. Water utilities face similar problems.

Now, the provincial treasury will need to sign off on the education department’s proposals to meet its debt obligations, public works said. The treasury declined to comment.

The education department in KwaZulu-Natal said “outstanding payments are now in the pipeline” and blamed budget cuts for not providing the funds, it said in a statement. 

KwaZulu-Natal’s coalition government is working to steady its finances after years of poor national-level policy implementation.

A declining global economy and the Covid-19 pandemic “have played havoc” with the province’s fiscal stability, Francois Rodgers, its finance head, said while presenting its budget last month. 

National lawmakers have cut the province’s budget by 60 billion rand over the past four years, he said. 

KwaZulu-Natal’s parlous financial state mirrors that of the national government. Lacklustre economic growth and an era of state graft, mismanagement, and bailouts for underperforming state companies have weakened public finances.