The perils of private funding

Three years ago, the then chief justice of South Africa Mogoeng Mogoeng dropped a bombshell when he announced during his Judiciary Report that he had been offered R600 million to ‘modernise’ the courts.

The state of courts, which serve as the centres of delivering justice, mirrors the perennial national challenges of underinvestment and poor maintenance.

As access to the courts had been widened with the introduction of new high courts in locations that were previously underserved, the modernisation of court processes has not kept up.

Between 2012 and 2019, just 16 courts had been equipped with wifi connectivity under a programme spearheaded by LexisNexis.

Resource limitations from a state struggling with increasing demands on the public purse simply meant there was no funding available to initiate a comprehensive modernisation process. An offer of any amount – especially R600 million – would have been regarded by many as the great leap forward in ensuring access and efficiencies were embedded throughout the system.

Tensions

Wisely though, the chief justice declined the offer on the basis that the approach should have been made to the National Treasury instead of the chief justice.

The reasons underpinning this rejection include the longstanding tension between the expectations of donors and the responsibility of governments.

A government by its nature exists for the service of all citizens and should not engage in arbitrary discrimination. In its resource allocation, the state has to manage trade-offs across competing and equally legitimate demands.

Naturally, resources will never be enough to meet the demands of all sectors that the state needs to serve. The introduction of additional financial resources into state coffers can help alleviate backlogs and accelerate service delivery, but it doesn’t come without complications.

Donor funding traditionally comes with explicit and implicit expectations. The most glaring expectation is that donors will state a preference for what ought to be funded.

This already creates a complexity for the government, which may well be aware that the preferred projects or initiatives championed by a donor are not the most pressing projects as far as the nation at large is concerned.

Collaboration

The various ways in which collaboration between the state and the private sector can be structured – including public-private partnerships – enable the state to bypass its own bureaucracy and has the advantage of creating more linear accountability.

A donor who funds a defined initiative, and makes feedback and reporting a condition for continued partnerships, forces the state to account for specific funds rather than the general allocation of funds into a wide pool of resources.

The allocation into a wide pool rather than specific initiatives makes it difficult for donors to assess the impact of their contributions and creates a sense of apathy.

Given the perceptions of corruption endemic in state departments, any donor whose resources are not earmarked will inevitably assume they are at risk of being fleeced through corruption and a lack of competence.

In 2021, the introduction of the Solidarity Fund as a mechanism that was close to government but outside of state bureaucracy enabled many more citizens and corporations to make contributions towards the national relief efforts aimed at dealing with the Covid-19 pandemic.

South Africa’s recent history of entanglements between private enterprises and public officials – captured most acutely through the stories of EOH and Bosasa and the Arms Deal before – means that a sense of vigilance and anxiety about the exchange of resources will always exist.

Read:

Quid pro quo vs philanthropy

As we learnt from the case studies ventilated at the Zondo Commission, the most obvious expectation is that donors to political parties will expect a smooth runway in case they decide to tender for government business.

For philanthropic donors who may not even have business links with the state, the anxieties relate to the nature of projects championed and how these affect the government’s responsibility to allocate resources equitably across competing demands.

While many government departments can and should benefit from partnerships with private individuals and corporations, some departments carry mandates that are complicated by design.

The Department of Justice, the Public Protector and similar agencies represent such a complexity.

An appropriately designed justice system owes its legitimacy and credibility to the ability of citizens to believe that all disputes are adjudicated fairly regardless of the social and economic status of the affected parties.

The introduction and use of non-state resources within that cluster creates a perception risk that can be fatal to the legitimacy of the justice system at large.

Steinhoff paying for its own police investigation

In December 2017, South Africa’s greatest corporate fraud was uncovered at Steinhoff.

The complexity of the fraud and the multi-jurisdictional nature of the entities involved required skills that state prosecution agencies simply do not have.

The lack of internal skills and the historic backlogs meant that years passed with little progress being made on holding the perpetrators accountable.

In 2021, the National Prosecuting Authority (NPA) announced that Steinhoff would make R30 million available for the South African Police Service (SAPS) to conduct investigations into Steinhoff itself.

Read: Steinhoff is funding police investigation into its affairs

The obvious conflicts of interest were apparently superseded by the fact that left to its own devices the state would never have the financial and technical resources to even move forward with the case. As one would expect, such a development left many citizens questioning whether even the most comprehensive work on the Steinhoff case could ever stand the test for legitimacy.

Resource ‘mobilisation’

Earlier this month, Business for South Africa (B4SA) announced that it has created a Resource Mobilisation Fund aimed at helping the country to manage its energy crisis.

The design of the fund seems to mirror that of the Solidarity Fund, and it will be in existence for a limited period.

Vigilant citizens will naturally worry about whether this represents yet another step towards the privatisation of the energy sector (although the anxieties associated with the Steinhoff debacle and the court modernisation proposal were different).

The role played by some prominent corporates in the past – think of the hollowing out of the South African Revenue Service (Sars) and corruption at Eskom – raises another issue …

It is not just the state that has to address a credibility crisis when it comes to such initiatives, it is also corporates whose inherent conflicts and complicity in creating the crisis make the scepticism well justified.

But given the dire state of public resources and skills, this may just be one of many initiatives that will gradually take centre stage in keeping the country functional.