Publish Date: 01 Jan 1999

The second term of government started against the backdrop of what Finance MEC Enoch Godongwana stated was a period of financial "consolidation”, building on the progress made to restore financial stability after the Section 100(1) intervention.

It was a period in which steps were taken to improve the operational efficiency of the provincial administration and several initiatives were launched to address very specific challenges, some of which continue to bedevil both the provincial, and in some instances national, government. They included:

  • What Premier Makhenkesi Stofile described as "the continued mutilation and death of our children and initiates;”
  • The lack of progress with the Wild Coast Spatial Development Initiative (SDI), including the N2 Wild Coast Highway linking East London with KwaZulu-Natal;
  • The disposal of inherited properties by the Eastern Cape Development Corporation (ECDC);
  • The eradication of the bucket system, and
  • The percentage of the budget devoted to personnel or cost of employees (CoE).

At the end of the second term the province once again faced a financial crisis and an Interim Management Team was appointed in 2004 to address backlogs and "establish sound management and leadership” in the departments of Education, Health, Roads and Public Works and Social Development.

Institutional Development and Governance

The second term saw the ANC returned to power having won 73.80% of the vote which translated into 47 seats in the now enlarged 63-seat legislature. The United Democratic Movement (UDM) had nine seats becoming the official opposition (13.60%), followed by the Democratic Party with four seats (6.29%), the New National Party two seats (3.22%) and the Pan Africanist Congress (PAC) one (1.14%).
Reverend Makhenkesi Stofile was re-elected premier.

The second term saw the introduction of the "cluster” system with integrated cabinet planning work placed under three clusters: social needs,eEconomic development and public service and administration.
Premier Stofile noted at the start of the term that "no department is an island,” adding that integrated planning would be located in the Office of the Premier and guided by the Provincial Growth and Development Strategy (PGDS). It was acknowledged at the end of the term, however, that while the clusters had played "a key role in enhancing horizontal integration across government departments, huge challenges remain with respect to vertical integrating the planning and budgeting of the other spheres of government”.

In addition, in line with national government, the province started with multi-year budgeting linked to three-year strategic plans and attempted , in turn, to link these to cabinet-approved programmes of action broadly aligned with the PGDS. 

Two initiatives geared to address this were the establishment of the Inter-Governmental Forum (IGF) and IDP Forum. The IGF brought together provincial and national departments, municipalities and state-owned enterprises, and played "a central role in sharing information and ironing out coordination failures and aligning planning across the spheres of government”. The IDP Forum, convened by Local Government and Housing, supported the integration process by "providing a platform for provincial departments and municipalities to interact around budget priorities and implementation plans”.

One of the major challenges identified at the start of the second term was the continuing fraud and corruption that was systemic in the provincial administration. The war on corruption continued, with an anti-corruption summit held at the end of 1999. Flowing from that:
  • An anti-corruption forum was established in March 2000;
  • An internal audit division was set up and the process of establishing an audit committee initiated;
  • An information manager was appointed for the provincial administration, and
  • Steps were taken to strengthen interaction with existing anti-corruption agencies.
These initiatives met with a measure of success, although challenges remained, specifically with welfare payments. 

The second term also saw the creation of a multi-party forum to drive the disestablishment of the old municipalities and establish new ones paving the way for local government elections and the creation of wall-to-wall municipalities throughout the province. Local government elections were held in 2000.  Nelson Mandela Bay was the sole metro in the Eastern Cape which had a total of 45 local and district municipalities. From this point on there were wall-to-wall democratically elected local government institutions from one side of the Eastern Cape to the other.

The new municipalities required significant support as the mandate of local government had been extended considerably beyond the traditional delivery of services to include areas such as local economic development, spatial planning, and planning integration. Almost inevitably, there were capacity challenges, particularly at senior management level. These remain today specifically in the area of finance as was pointed out recently by the Auditor-General in his Consolidated Report on Audit Outcomes of Municipalities. Training programmes were put in place to improve the capacity of municipalities.

The majority of the new municipalities faced a myriad of other challenges, including a weak tax base and the inability of residents to pay for services; out-of-date financial systems and political issues that resulted, for example, in infighting among councillors and removal of office bearers.

The stability of the administration however, was, negatively affected by a major cabinet reshuffle in 2002 which saw changes, among others, in the key portfolio of Education.

An important initiative was the creation of the Rapid Infrastructure Agency (Rida) which sought to harness the skills amassed by the Coega Development Corporation (CDC) in the provision of infrastructure, specifically in the former homelands, with funds transferred from the Department of Public Works which lacked the requisite capacity. Rida was disbanded in the next term but re-emerged later as Coega Services and now plays a critical role as a project manager in the provision of social infrastructure such as clinics and hospitals.


One critical decision taken was to draw a line beneath the financial chaos inherited from the former homelands where  documentation simply did not exist to make it possible to conduct even a cursory audit of the statements of account.

At the start of the new term, in presenting his budget for the 2000-01 financial year, Finance MEC Enoch Godongwana was able to announce that through a debt verification process, savings of approximately R217 million had been identified and that over the past two years the province had been able to repay R2.5 billion, which included some new debts that had been identified. He was able to state: "We hope by the end of this financial year (1999-2000) we will be left, everything being equal, with approximately R480 million debt, which we hope to liquidate in the coming financial year”.

The following year, MEC Godongwana was able to state that repayment of the debt had been completed. Such was the improvement in the financial situation that Finance Minister Trevor Manuel was able to state when he presented his budget in 2001 that the Eastern Cape had overcome its "serious financial difficulties” and "the need to set aside funds to deal with the debt overhang no longer holds back provincial spending”.

One critical initiative flowing from a recommendation of the Standing Committee on Public Accounts (Scopa) was to draw a line under the 1995-6 financial year so that no balances were carried forward from the former Transkei and Ciskei administrations for which documentation did not exist.

The challenge the administration faced was to develop the capacity to monitor expenditure trends in all departments and this was achieved through the development of an "early warning system” which  alerted officials when they were in danger of overspending. A second challenge was to develop  financial management capacity in departments. This was addressed through the appointment of chief financial officers and creating  a CFO support programme.

During the course of the second term there was also a marked improvement in audit outcomes. In the 2000-1 financial year, the auditor-general declined to express an opinion on the financial statements of eight departments. By the following financial year, however, only four departments fell into this category with the remaining eight receiving qualified reports. In the 2002-3 financial year, the performance had improved to the point where two departments were given unqualified audits with others receiving qualified reports and the AG declining to express an opinion on three.

In the 2001-02 financial year the concept of "ring-fencing” funds was introduced to safeguard the allocation for specific functions such as the AIDS programme. These funds could only be accessed through application to the Provincial Treasury and submission of business plans.

The second term also saw the province start to cut back on the percentage of the budget that was allocated to personnel expenditure to 55% by 2001-2. By the following year it had been reduced to about 50%, although this was a short-term victory as the percentage of the budget swallowed by personnel costs soon increased.

Another significant challenge the province  faced from inception was the percentage of the budget that had to be allocated to departments within the Social Needs Cluster, above the national average. The Intergovernmental Fiscal Review revealed that the Eastern Cape allocated an average of 83.3% of its budget to Education, Health and Social Development between 1999-2000 and 2002-03 and the pressure was exacerbated by the impact of HIV/AIDS.It was only in 2002-03 that the Eastern Cape’s capital spending came close to the national average.

Despite the measures put in place to prevent overspending, in the 2003-04 financial year the system "overheated” and significant overspending was recorded with the accumulated reserves from the previous year depleted and  revenue from interest reduced dramatically.

As of March 31, 2004, according to the 2004-05 Budget, the Eastern Cape had a bank overdraft of R744 million which, in addition to the budgeted deficit, outstanding creditors in excess of R899 million and over and expenditure by Social Development of R1.2 billion, meant the province was in debt to the tune of R3.5 billion.


The second term saw the foundations laid for important initiatives that would  start to bear fruit in the third and positively bloom in the fourth.

The first was the Coega IDZ which was gazetted in 2001 as the country’s first industrial development zone, with President Thabo Mbeki signing the proclamation of the construction of the Port of Ngqura in January of the following year.

R3.2 billion was set aside for the marine side infrastructure. It is important to note that the provincial government played a critical role in the financing of the infrastructure in the IDZ, contributing R600 million. The CDC also compiled a substantial job-seekers data base and registered approximately 40 000 people who could be employed on infrastructure projects and later by tenants in the IDZ who were able to identify and recruit personnel from the data base. Negotiations were underway with Pechiney for the construction of an aluminium smelter.

The Coega Industrial Development Zone (IDZ) became the first declared IDZ in December 2001, with the Coega Development Corporation (CDC) announcing that the infrastructure design for the project had been completed. By the following year, a total of 15 construction sites had become operational.
The East London IDZ was also designated by Trade and Industry Minister Alec Erwin in 2003 and the first tender for the construction of external infrastructure was awarded in the same year. A further important initiative was the decision to link investment in the East London IDZ with the W204 new Mercedes C Class which allowed the ELIDZ to secure a number of component manufacturers linked to this project. Subsequently it repeated this approach some years later with the W205.

During the second term, following the enactment of national gambling legislation which allocated a specific number of casino licences to each province, the Boardwalk Casino opened in Port Elizabeth and Hemingways in East London creating thousands of jobs during the construction phase and collectively well over 1 000, once the two facilities were operational. By April 2006, tax collected by the provincial fiscus on casino operations was in excess of R5.6 million.
The transformation of the Eastern Cape Development Corporation (ECDC) into the province’s development financier and driver of investment continued with one focus being to identify  properties inherited from the former homeland agencies, compile an asset register and list of properties, specifically residential, which were not core to the corporation’s business.

The second term was also the time when rural development began receiving policy prioritisation. A Rural Development Summit was initiated by the Eastern Cape Provincial Government (held at the then University of Transkei), which was a major catalyst in the decision by national government to launch the Integrated Sustainable Rural Development Strategy.      

With regard to roads, one major achievement during the second term was the completion of the road through the notorious Kei Cuttings by the South African National Roads Agency Limited (Sanral) following sustained lobbying by the provincial government. An indication of the focus  placed by the administration on infrastructure was evident from the fact that while R154 million was spent on roads in 1999-2000, the figure had risen to more than R1 billion by 2002-03.

One of the roads under construction was the Ugie-Langeni link  which was critical for the development of forestry in the area. Work also began on the Kei Rail project, the upgrading of the railway line between Mthatha and East London.

Agriculture continued to reflect the imbalance of the past with commercial farming restricted almost exclusively to the western part of the province with significant production of citrus in the Sunday’s River Valley, mohair and wool.

Agricultural initiatives were launched around olives, sugar beet – for the proposed biofuels refinery at Cradock – hemp and honey bees where it was suggested that the whole coastal area from Tsitsikamma to Port Edward was suitable for honey bee farming and that "thousands” of small farms would be started. None of these initiatives reached fruition in any significant manner.
National government as well as provincial and local government were involved in developing business plans for the Wild Coast SDI and the identification of priorities but without long-term plans for holistic development. There were short-term projects in the area, however, such as a water project in Coffee Bay. Challenges around the Magwa Tea Estate continued and remain unresolved. All three spheres of government were involved in attempting to drive the development of business plans for the Wild Coast. Little progress, however, was made with the anchor project – the N2 Wild Coast Highway.

The second term of government did see significant economic growth, particularly between 2002 and 2004. The growth was driven largely by finance, trade and property,  particularly with the comparative bargain prices of properties in coastal towns and cities being "discovered”.

In addition, there was significant investment in the automotive sector, driven by the Motor Industry Development Programme (MIDP). Manufacturing outside this sector, however, continued to decline.

Human Development 

One of the challenges that faced the Eastern Cape was the comparative cost of delivering infrastructure such as schools and clinics compared to other non-rural provinces such as Gauteng.

A number of approaches was made to National Treasury over the years in an effort to persuade it to adopt a "costed norms” approach but without success and the equitable share continued to be allocated on the basis of an accepted formula. A backlog component was introduced but essentially not what the province had sought.

The second term saw the introduction of the concept of "ring-fencing” with funds being subject to this for the HIV/AIDS awareness programme.

There were considerable changes to the higher education architecture during this term. The province fought a rearguard action to prevent  the University of Transkei from closing, while the process of the establishment of Walter Sisulu and Nelson Mandela Metropolitan universities got underway.

One of the major challenges was the replacement of doctors, nurses and managers who had left the employ of the department over the 10 years since 1994. By the end of the term, one third of posts for professional nurses at primary health care facilities were vacant, with the situation being particularly critical in  rural areas. To address this, a rural incentive strategy was developed.

As part of initiatives to address the HIV/AIDS, the Social Needs Cluster developed a provincial HIV/AIDS implementation plan. Key strategic focus areas of the plan were: coordination, social mobilisation, awareness and prevention, treatment, care and support, HIV/AIDS workplace programmes, poverty eradication, the provision of water and sanitation and information management and monitoring. The Eastern Cape AIDS Council was launched, and a secretariat support team housed within ECSECC.

One of the problems that surfaced at the time and that continues to plague not only the Eastern Cape but elsewhere, was the number of youths dying as a result of botched circumcisions. Because the legislative framework did not exist to allow the province to intervene, this was initiated by the Department of Health. With the assistance of the Legal Services Section, Health MEC Bevan Goqwana was able to report by the end of the term that a legal framework had been completed to deal with the problems related to the circumcision of young men in the Eastern Cape. The department had been working since 1995-6 following death and mutilation of young men but did not have the locus standi to charge anyone. Only the parents of initiates had the required locus standi.

The bucket eradication programme was initiated in the 2002-03 financial year in Cradock, with Port Elizabeth also marked as a target area. The major challenge with attempts to introduce a water-borne system across the Eastern Cape was the shortage of water in some areas.

Three urban renewal programmes at Mdantsane and Motherwell (national projects) and Ngangelizwe (provincial) were underway with 42 projects at the implementation stage in Mdantsane and Motherwell.
By the end of the first decade of democratic government, the Eastern Cape had built 127 478 houses with a further 105 141 under construction.

During the first decade the province completed 492 schools with an additional 141 scheduled to be completed before the end of the 2001-4 (?? 2001-02 or 2003-04) financial year  – this, against the background of statistics in the 1996 School Register of Needs that showed  206 schools in the province were unfit for education purposes and 622 needed major renovation.

Significant strides were also made in providing water and sanitation to schools as well as electricity with solar power being used in remote areas.

By the 2003-4 financial year, R167.4 million was budgeted for the Primary School Nutrition programme with about  900 000 learners targeted for feeding.

By the end of the second term, the Eastern Cape Government could claim over 10 years to have:
  • Built 120 new clinics/health centres and upgraded 97 hospitals, most of them in the eastern part of the province;
  • Improved immunisation coverage to 64% and 90% in some areas;
  • Established 220 HIV/AIDS voluntary counselling and testing sites and rolled out a mother-to-child prevention programme to 156 health facilities;
  • Improved access to education with the construction of some 636 new schools and more than 11 000 classrooms, and in the process decreasing the teacher/ pupil ratio from 1:40 in 1995 to 1:30 in 1993;
  • Extended a social security lifeline to some 1.3 million impoverished people, which included 530 000 child support grant beneficiaries;
  • Enabled construction to get underway at both the Coega and East London industrial development zones;
  • Spent R14.8 billion on road construction and maintenance, mainly in  Transkei, to address the parlous state of the provincial roads, and
  • Spent R2.5 billion on housing development and R3.2 billion on approved subsidies.






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