Cash-strapped City of Tshwane blew R500m on 'white elephant' agency

The cash-strapped Tshwane metropolitan municipality has over 10 years blown more than R500m on a white elephant economic development agency that internal critics say did not attract a cent of expected foreign direct investment to the city.

The administrative capital’s council has received proposals from its economic development and spatial planning department — to which the agency reports — for the Tshwane Economic Development Agency (TEDA) to be closed.

However, in an apparent looming power struggle, the city manager's office wants to retain TEDA and have the agency report to it instead.   

A report compiled in July last year by the economic development department titled “Proposal for the future of the Tshwane Economic Development Agency” said TEDA had been established in 2013 to attract foreign direct investment and facilitate new investments, but had failed to generate any value.

With the critical financial challenges the city is facing, it cannot afford to spend close to R1bn on TEDA should its service delivery agreement be implemented over a five-year period

—  Report by Tshwane economic development department

“It can be seen from this report that the skills at the agency will not be able to implement the mandate, especially to become financially sustainable. With the critical financial challenges the city is facing, it cannot afford to spend close to R1bn on TEDA should its service delivery agreement be implemented over a five-year period.”

The report said the more than R500m already spent on TEDA had not yielded value for money. 

If TEDA were closed, the department would work with organisations such as InvestSA and the Gauteng Growth and Development Agency to attract city investments “free of charge”, the report said. 

TEDA receives an annual grant of R61m from the city. In the year ending June last year, it had spent R42.5m of that on salaries and R2.3m on fees for its three-member board.

It spent R10m in the last five years on overseas travel, participating in exhibitions and hosting webinars. Another R5.1m was spent on preparing three developmental projects that were either discontinued or not implemented. Financial records show board members Anjue Hirachund, Kennedy Maimela and Jan Mocke — who charge R3,028 an hour — earned R623,426 between July and September last year. 

City spokesperson Selby Bokaba said TEDA was a special purpose vehicle to facilitate development, attract investment and promote trade. 

“There are significant growth initiatives that TEDA has facilitated, including [the] Rosslyn hub, a mixed-use development launched in 2018 with an initial value of R3bn, and the Tshwane freight and logistics hub, a catalytic project with an initial investment of R1.7bn and a huge impact in terms of assisting the automotive and other industries with transportation of their freight using rail instead of roads,” Bokaba said. 

He said the Rosslyn hub was part of the Tshwane automotive hub, which would attract more than R50bn to the city. “These projects resulted in thousands of jobs created and still to be created,” he added.

But an internal document and the council’s member of the mayoral committee (MMC) overseeing economic development suggest otherwise. The memo, addressed to economic development and spatial planning MMC Hannes Coetzee, said TEDA should be closed because it:

• Had not generated any value (despite the agency claiming it had attracted R16.5bn from 2013 to 2022); 
• Was not reporting properly to its shareholder department and performed the same roles as it;
• Was being funded through budget cuts made to other departments; 
• Had failed to project-manage the Tshwane automotive special economic zone because it lacked the required technical skills; and
• Had failed to generate foreign direct investment inflows, but rather only local investment expansions, which could be facilitated internally at no cost to the city.

“It is proposed that the city close TEDA and integrate the agency into the city,” said the memo compiled in July last year. “Though there will only be a direct financial saving of R20m per annum, the HR resources can be used to fill critical vacancies.”

The calls to shut it down are premature because we are in the process of making changes that will address the challenges, including developing and approving a new service delivery agreement

—  Hannes Coetzee, economic development and spatial planning MMC

Tshwane officials not authorised to speak to the media said the city's frustrations were that TEDA had not raised a cent in foreign direct investment — “its main mandate”. In addition, TEDA and its board refused to be subjected to oversight. “They seem to prefer reporting directly to political oversight, and also directly to other structures,” the officials said.

Coetzee confirmed receiving the document and said the city’s administration was divided over it. “The calls to shut it down are premature because we are in the process of making changes that will address the challenges, including developing and approving a new service delivery agreement,” he said. He declined to discuss the issue further.

“The city is in the process of advertising the CEO position, which indicates [its] intention to blow another R500m on TEDA,” said one official.

The city is in a precarious financial position and has been required to slash budgets by 30% across departments, including those delivering crucial services.

The situation is so dire that it has refused for months to implement the last leg of a three-year wage deal agreed to in 2021. This led city workers affiliated to the South African Municipal Workers Union to go on strike, demanding the metro implement the 5.4% wage increase.

Since then, more than 120 workers were sacked for taking part in what the labour court said was illegal action. City infrastructure was vandalised and torched. 

Executive mayor Cilliers Brink said the metro could not afford salary increases because the city’s R46.9bn budget for the 2023/24 financial year was underfunded by at least R3bn.