Dr Onkgopotse JJ Tabane was in conversation with the Auditor General, Mr Kimi Makwetu, who asserts that there is still no consequence for inaction in managing the country’s purse
It has been over seven years since Kimi Makwetu was appointed to the position of Auditor General. He prides himself in having been able to navigate a very difficult period in South Africa’s political history, where corruption has overshadowed the areas of financial management within government.
Makwetu has previously served as a deputy AG and has had to navigate the troubled waters of managing the country’s financial management — or lack thereof, for more than a decade. He speaks quite frankly about the state of collapse of financial management and labels some of the indicators as having largely regressed.
In his most recent report, released earlier this month, Makwetu notes, sadly, that the wrong hands are getting into the coffers, where public funds are concerned. This is serious, especially given the limited nature of such resources. He is a man who, despite his counsel being largely ignored, given the repeated trends of mismanagement, has not given up right to the end.
Under his watch, a new law has been piloted through parliament, which will empower his office to report truant officials to other organs of state for rapid investigation, and will also empower him to recover stolen funds by issuing what is termed a ‘certificate of debt’ to accounting officers who are not able to explain wasteful expenditure, in particular. He has no regrets that his office has tried everything possible to ensure that a new culture of accountability is established, to ensure that there is no longer a persistence of what he termed ‘staggering impurity’.
In a sense, the latest report is a sample of what has been going on over the last decade. Irregular expenditure trends have regressed, seeing municipalities wasting over R32-billion, as opposed to last year’s R28-billion. Other indicators are equally worrying and point to the collapse of financial management. Only 21 out of 219 municipalities received clean audits–and the reasons are varied.
At the heart of it all is a sense of entitlement to public resources. Makwetu believes there is no political will to tackle this crisis. Politicians are quick to welcome and support his work, but it’s their actions which are worrying, given the adverse reports that he has had to issue year in, year out.
Each time an audit report comes out, there is a contested narrative about whether these indicators are corruption or merely mismanagement. Makwetu has some choice words for those who are quick to say these horrible indicators (see summary of report outcomes side bar) are not corruption: “So, what are these indicators about?”
”Those who say this is not corruption must then say what this is” says Makwetu. This is clearly an issue that frustrates the AG. He comes across as having lost faith in the ‘peer review’ system amongst politicians in SALGA, as he believes some of them are current practitioners against whom some of his harsh findings are against.
Incidentally, SALGA’s response to his latest report hastened to say that the glass is half full, not half empty, and that the focus must be on ‘centres of excellence’. Makwetu was dismissive of this, stating that the problem is officials at SALGA, who are employees of the same politicians they are expected to critique.
The effectiveness of SALGA is therefore highly questionable. Makwetu says that SALGA should be at the forefront of the kind of advocacy work that must result in best practice in how municipalities are managed, instead of downplaying a deep crisis that is evidenced by his latest report.
Makwetu says that Treasury, as a custodian of the public purse, can do better to reign municipalities in, but, sadly, this has not been his experience. He cited the absence of a permanent Accountant General at the National Treasury as one of the signs that Treasury is not on top of the deteriorating situation of our national finances.
This observation may point us at the current crisis. He identifies the hollowing out of SARS and NPA as key weaknesses. Only recently, in view of the amended Public Audit Act, has the coordination with these critical institutions started. In this regard, Makwetu is complementary of SCOPA forming an anti-corruption task force, where these institutions can better cooperate.
All the indications are that the institution of the AG was given the space to do its work independently. His tenure existed in parallel with the era of State Capture and this presented its own set of challenges, where politicians attempted–albeit in a subtle way, to influence audit outcomes. Makwetu is of the opinion that they quickly got the message that he would not amend audit findings.
Makwetu is proud that his office hires some 600 chartered accountants, all of whom receive more exposure than they would have, had they been in the better-paying private sector. This is why one of his major disappointments during his tenure was when some of his staff were threatened by rogue elements within municipalities who sought to influence audit outcomes.
Makwetu ends his term this November, aware that he may not be able to use the instruments, now created by law, to hold politicians accountable for their use of the public purse, but he is satisfied that his advocacy role as a chapter 9 institution was well established during his tenure. Its major fruit is the amendment of the Public Audit Act that has in many ways strengthened the hand of the AG office and created a strong a culture of accountability.
These are some of Makwetu’s more pointed remarks on a range of important issues facing the country:
On SALGA and the capacity of Local Government
SALGA is better placed to build capacity issues. When it comes to dealing with difficult issues of accountability, some of the people around the table are themselves guilty. There is no sufficient courage. The officials who run SALGA are employees of the politicians who run SALGA.There are institutional limitations. The white paper on local government must be looked at critically.
There is a need to re-look at whether this is still relevant. We need to relook at the architecture and ask hard questions.
There is an opportunity to re-look at the professionalisation of local government and what can be done to reduce political interference.
Why don’t we look at centralising some of the functions such as payroll? This way corruption can be reduced.
On the overall challenges facing the state of financial management
The closeness of the Treasury to the situation leaves much to be desired.
There has been a high level of tolerance for a low level of skills. This causes the issues we highlight in the audit and creates an opportunity for looting. The skills audit is only one solution, while removing weak CFOs at the disposal of councils is another.
Councils do not exercise sufficient oversight, such as quarterly oversight responsibilities. The councils only really look at the financials when audit results are presented to them at the end of the year. Where some oversight happens, the council committees are politically dominated. There are some weaknesses around internal audits.
On the excessive use of consultants
Madibeng Municipality has got a total expenditure of R34-million for the payroll cost, indicting a huge staff complement.
The total bill is more than R35-million, suggesting that this is a cost incurred over a period, yet their state of financial management is far from desirable.
They have instead had four consecutive disclaimers and they have been getting a lousy audit outcome despite these costs. A total of R1,2-billion is staggering given that there is a big staff complement. What is the role of the councils? These are some of the glaring weaknesses.
On the amendment of the Public Audit Act
This act does not replace levels of accountability of councils. What auditors have lamented is that there is an expectation from the public. What the act is allowing them to do is examine any incidents of fraudulent activities.
The amendment has given them renewed authority. The situation presses Accounting Officers to explain suspicious transactions. In the past, it was enough to simply report the matters as irregular expenditure and leave it there. The new law gives us a mandate to ‘stay with the bone’ and insist on answers about suspicious transactions.
If there is no credible evidence and explanation, the AG Office can insist on issuing a ‘certificate of debt’. This ensures that the findings are not ignored. An example of this is where there is payment for goods not received.
The amendment draws from the responsibilities of the accounting officers. The accounting officers must demonstrate preventative controls.
There is an independent committee established to scrutinise all issues of natural justice to make sure we do not lose cases where such a certificate is issued.
An example of this is when the Ghana AG was taken to court over such a ‘certificate of debt’. After issuing this certificate of debt, he was placed on 123 dates of leave! There is a need for transparency.
On corruption trends
There has been a series of interventions and status review programmes. They present what can be used to help them address possible findings, like internal preventative interventions with accounting officers. This does not wait for audit time but it has, however, not seen much traction. There is no rigour of consequences. We have escalated to councils that there must be a proper performance review. Where there are no limits to discretion which is where there will be flood gates of corruption.
As long as the benefits keep flowing and there is no deterrent, and no consequence, corruption will persist.
We need to ask the question of how the citizenry can be more alert.
Advocacy role of the AG office
Example of what we are experiencing now in the COVID-19 audit. We have reached out to various civil society organisations and there is a sense of complementarily given social audits. Areas like local government will raise these issues more than an annual audit report.
On political will
Politicians are always found wanting. There is little by way of action when it comes to addressing the issues of audit outcomes. Politicians quickly get distracted. It has been difficult to get them to focus on our recommendations made in the reports.
There is an abuse of discretion and this is the loophole used for corruption. There is no accountability rigour, therefore a municipality can pay for AMC Cookware and DSTV subscriptions from the municipality bank account without anyone realising it.
Is there a silver lining — Preventative control is the answer
Civil servants are dictated to by the priorities of their caucus. This is how the recommendations of the AG office fail to be implemented.
There is a need for councils to oversee the use of finance.The former AG conducted a roadshow to all municipalities. While this was welcomed by the politicians, not much was practically implemented.
Preventative control steps are not taken seriously. We have developed booklets of preventative controls and one hopes that these can be implemented to avoid loss of confidence and loss of money.
Often distracted by the presence of big brother. This makes the governance issues fall by the wayside. SAA is a good example. When we took over its audit, we were alarmed at the lack of rigour despite the involvement of the private sector auditors. There was no proper due diligence in appointing boards. We need to raise the bar in this regard to get this area right. The appointment of boards has just been a failure.
There is an absence of a strong performance culture. The civil servants in parastatals take advantage of the competitive landscape and end up writing their own salaries.
Kimi Makwetu leaves the office satisfied that he has done all that was necessary to fulfill the constitutional mandate that he was entrusted with. The reality is that the state of our finances has only worsened, despite his numerous reports and findings. He admits that the politicians are not focused enough in implementing his recommendations. Therefore, it became necessary to amend the law to empower his office to do more than just recommend and wait for the next year. He will not be there to see the fruit of his toil, but institutions are supposed to outlive their occupants.
Our institutions need to make sure that the Chapter 9 institutions must not be made to feel helpless. Makwetu realised that he could do more than simply feel defeated by politicians ignoring his recommendations—his legacy will be felt when those who have gotten away with impunity face a real threat of prison for looting the resources that the public have entrusted them with. His tenure was in no way perfect—with state capture happening under his watch, but here is a civil servant that on all accounts has done his bit for our future generations.
Thembekile Kimi Makwetu was born in Cape Town and completed a Social Sciences degree at the University of Cape Town in 1989. He received a BCompt Honours degree from the University of Natal (distance learning) in 1997 and is a qualified chartered accountant. He started his career with Standard Bank and later worked at Nampak. He completed his articles at Deloitte where he progressed to senior management before joining Liberty and Metropolitan Life in Cape Town. He moved to Gauteng in 2003 where he worked at Liberty Life. Makwetu returned to Deloitte as a director in the firm’s forensic unit before his appointment as Deputy Auditor General at the Auditor General of South Africa (AGSA).
On 1 December 2013, the Former President of the Republic of South Africa, Mr Jacob Zuma, officially appointed Makwetu as the new Auditor General of South Africa for a period of seven years.
Dr Onkgopotse JJ Tabane