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Free State ordered to pay NPOs R120 million in outstanding subsidies

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“If financial constraints were an issue, the respondents should have played open cards,” says judge

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Photo of a gavel

A court has ordered the Free State provincial government to pay non-profit organisations caring for children, the frail and elderly, more than R120 million in outstanding subsidies. Photo: Brian Turner via Flickr (CC BY 2.0)

The Free State High Court has ordered the provincial government to pay non-profit organisations caring for children, the frail and elderly, more than R120 million in outstanding subsidies.

The legal battle began in 2002 between the province and three NPOs – Engo, the Provincial Management Committee of Youth Care Centres in the Free State, and the National Association of Welfare and Not-for-Profit organisations.

The dispute was “resolved” in 2014 when, following a court supervisory process, a revised subsidisation policy was agreed to and made an order of the court.

The Province said at the time this would enable it to present to the Treasury a properly costed and realistic business case for increasing NPO funding, aimed at eventually funding the full costs of all social welfare service programmes in the province.

Judge Christiaan van der Merwe in his judgment said: “I do not think that there is any sound reason to doubt this commitment and this [policy] revision should enable the department to continue to make a compelling case for increased funding.”

But five years later, the promises were not kept and the NPOs headed back to court in March.

Last week, Judge Johann Daffue ruled against the government, declaring its inaction to be contrary to the Constitution, unlawful and invalid, as too was the failure of those responsible to develop the 2014 policy by setting clear targets for the progressive realisation of the rights of children, older and other vulnerable persons.

He said it was one of the most difficult judgments he ever had to write: a ruling against the applicants could leave hundreds of people wanting for food, clothing and shelter; a ruling against the government could have a negative impact on service delivery.

The applicants, which run family care offices, youth and child care centres and housing for the poor and frail, argued that the MEC and HOD for the provincial Department of Social Development gave an undertaking, “an enforceable promise” that core costs, including salaries, water, electricity and food, would be updated annually with a concomitant increase in subsidies.

These costs would also be reviewed through consultation in three-year cycles to take into account changed circumstances.

The applicants had a legitimate expectation that the department would perform its duties arising from the 2014 policy, that it would make proper submissions to the treasury for funding and increase subsidies within a reasonable time.

Judge Daffue said it was common cause that there had been no compliance with the ruling and there was no serious dispute over the claims of hardship in the sector or the calculations about what was owed.

He said the hopes of the NPOs were raised in the 2018/2019 financial year when they were advised that the policy would be implemented and they would receive partial backpay. But this never happened.

The department, he said, argued that this should be viewed as incapacity rather than unwillingness. “They argued that there have been gradual increases. It cannot be said that such increases were not as a direct result of the [2014] judgment. Although the policy may not have been given full effect.”

The judge said the respondents took umbrage to allegations that they were “riding roughshod over the needs of the most vulnerable in society”, arguing that there was no malice.

The repeated claim was that they did not have the money.

“It may be an argument to say that there is no money to provide certain services, but the real question is whether proper planning and budgeting processes were followed,” said the judge.

“If financial constraints were an issue, the respondents should have played open cards from the beginning instead of allowing arduous, prolonged and expensive litigation.

“They [the respondents] accepted that the 2014 policy was constitutionally compliant. If [financial] matters became worse after 2014, they should have taken immediate legal steps to set it aside. Instead they kept the applicants on a string.”

He said the care of children and older people was a “day in and day out commitment – a never ending obligation”.

“The department never had in mind to implement the policy. It believed that a national policy would be crafted by the national government. They ignored their constitutional obligations for years, apparently waiting for this new policy. In the process many vulnerable children and older persons did not receive benefits which would otherwise be the case.

“Budgetary constraints do not meet the test for reasonable and justifiable limitation of rights.”

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