South Africa's reliance on consultants threatens to open up a can of worms over how global and local consultancy firms rake in billions of rand in fees.
In the 2015-16 financial year South Africa spent an estimated R25-billion procuring the services of consultants. In the 2014-15 financial year the spend was R31-billion. An auditor-general's report said South Africa had cumulatively spent R102-billion on consultants between 2008 and 2011.
The consultancy space is so lucrative, in fact, that it is bitterly fought over, all the way to the courts.
A case is playing out between Trillian CEO Eric Wood and his former associates at Regiments Capital, Litha Nyhonyha and Nevin Pillay. Essentially, the Regiments directors accuse Wood of diverting business away from them. Nyhonyha said state-owned enterprises (SOEs) such as Transnet and Eskom were "big-ticket" items and so far the fallout with Wood has led to material losses from losing business from Transnet, among others, worth R40-million and counting.
International consultancy firms are also fighting for their piece of the high returns from consultancy work, with McKinsey & Company at the centre of a report by Advocate Geoff Budlender over how Eskom had paid R266-million to Trillian.
Economic commentators are questioning the value and rationale behind the excessive use of consultants.
"Much consulting work is overpriced and not very useful," said a US-based analyst who investigates multinational corruption in Africa and who declined to be named.
"They simply tell governments what they already know, except in jargon and management speak."
Could it then be that there are hidden beneficiaries from the billions of rand flowing between global consultancy firms and SOEs?
Eskom, SAA and the SABC have been making losses for years and have been kept afloat by government guarantees. Some of the work contracted out to consultants appears to be meaningless. At SOEs consultants are brought in to perform routine functions such as the preparation of financial statements, human resources work and IT services - activities that could be run in-house.
In South Africa the use of consultants shot up after 1994 as the change in the political guard resulted in a gap in expertise at SOEs.
Ian Cruickshanks, chief economist at the Institute of Race Relations, said privatisation of SOEs would have plugged the gap left by a shortage of experts and eased the problem.
He said wages in the private sector in post-apartheid South Africa had rocketed to more than 40% higher than public sector wages, resulting in skilled personnel leaving the public sector for the private sector - something he said should never have been allowed to happen.
"If they had not gone in this direction initially, if they had simply gone into partnership with the private sector right from the early '90s, they'd have a far sounder structure," he said.
Azar Jammine, chief economist at Econometrix, said part of the problem for SOEs was that they had lost a lot of their technical experts.
"An attempt was made to get rid of the old guard far too quickly," he said.
Many of the former senior officials had taken their severance or retirement packages, only to return as consultants.
"It has come at a far greater cost than if they were kept on as employees," he said.
Across municipalities, consultants also have their foot in the door, with the auditor-general persistently raising the red flag over the danger of overreliance on them.
In a 2015-16 report on the consolidated audit outcomes of South Africa's 263 municipalities, the auditor-general found that 230 consultants had been used.
"It is concerning that consultants are appointed to do work which in fact forms part of the role and responsibilities of CFOs and financial staff," Kimi Makwetu said in the report published in June, noting that the lack of responsibility regarding financial reporting was a common trend at municipalities.
In the 2015-16 financial year about 27% of municipalities had shortages in municipal managers and chief financial officers. As the contracts of these key officials come to an end in 2016-17, the instability created by the vacancy rate at the end of the 2015-16 financial year could worsen, the auditor-general cautioned.
"We call on the political leadership to carefully consider the impact of the instability and the loss of skills," he said.
Themba Godi, chair of parliament's Standing Committee on Public Accounts (Scopa), said the weaknesses in the administration meant the objectives of the National Development Plan based on a capable state were being defeated by the lack of capacity.
"It is not so much that you have high vacancy rates, although that also contributes, but more the fact that you have the wrong people appointed to positions that require skills they don't have," he said on Thursday.
"You have people who are employed and do not do the right thing and there are no consequences. So the state appears to be incapable because they contravene the laws continuously and yet it is a deliberate thing in the absence of consequences."
Scopa recently called for heads to roll at the SABC. In 2014 the public broadcaster contracted Sekela Xabiso to probe fruitless and wasteful expenditure but three years later the audit was still incomplete and the SABC paid five times more than the contract's initial cost of R5-million.
But Godi insisted that the new dispensation was not to blame. In the context of the constitutional requirement for transparency and accountability the state had criminalised "a lot of things that were taken as normal practice under apartheid, therefore requiring a higher level of accountability that was not there before.
"Therefore you had a combination of skills but also a higher disclosure requirement and much more stringent processes, especially around procurement, which requires a lot more of officials," Godi said.
"If you look at the SABC and SAA your problem is not skills, it's governance. When there is instability, capable people leave and you have people who are acting for years. Surely you are going to have all these kinds of financial malfeasance."
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