July 24, 2012
Following the release of a damning report on the scale of mismanagement at municipal levels, Finance Minister Pravin Gordhan on Monday revealed that the national treasury would take a tighter grip on procurement processes across the country.
Gordhan announced that treasury would create a procurement oversight unit to actively enforce supply chain management at a national level and would shortly appoint a chief procurement officer. The position would be advertised in two weeks and would be established within the next two months.
“Where there are transactions for a particular size or type within the national domain there must be the ability to assess whether they meet market criteria in terms of prices [and] whether proper processes havebeen followed,” he said.
The announcement was an indictment of local government’s failure to spend and account for public money effectively.
The minister was speaking at the release of auditor general Terence Nombembe’s report on local government audit results, which showed that only 5% of all municipal entities – a total of 13 – had achieved clean audits for the year 2010/2011.
Gordhan said IT systems would be developed to allow the treasury to actively monitor compliance with financial management requirements so that it may demand information regarding procurements, such as how decisions were made and by whom.
The move may help prevent public spending fiascos such as the multibillion-rand leasing scandal that saw former police chief Bheki Cele and former public works minister Gwen Mahlangu-Nkabinde sacked last year.
Gordhan said the government should be able to demonstrate that there were consequences for nonperformance and for working outside the law.
“At the moment, those consequences are not there. When consequences are not there continuously then a level of impunity develops,” he said.
He said the new oversight mechanism would require the help of law enforcement agencies, who would bear the responsibility of preparing cases against and prosecuting those guilty of corruption.
With reference to the auditor general’s report, Gordhan said he was particularly disappointed that some large metros, which had better skills and capacity than small municipalities, did not received clean audits.
“If they can’t meet simple criteria in financial management, then it’s a matter the treasury has to take a closer look at,” he said.
Nombembe’s damning report
Nombembe’s report showed there were three root causes behind the slow progress towards clean audits in local government.
The biggest problem, he said, was a general lack of consequence for poor performance. Modified audit results were simply considered the norm, he said.
In addition, over 70% of those audited did not have the minimum competencies and skills required to perform their jobs.
Worryingly, over half of the municipalities audited were slow in responding to the auditor general’s suggestions and were not taking ownership of key financial controls.
Nombembe said if these issues were not addressed, they would continue to weaken governance.
He also complained that most municipalities employed consultants in areas where they already had people to do the work, and even then the results were not as good as they should be.
Cedric Frolick, National Assembly house chairperson, agreed, saying: “What are the employees doing when 70% of the work is being done by people who must be paid for it on top of their salaries?”
“Why are people who are not doing their job, being allowed to keep on [not] doing it?”
Meeting the criteria
But Minister in the Presidency responsible for performance, monitoring and evaluation Collins Chabane said because of the way the three spheres of government were structured, it was difficult to make interventions in local government unless specific criteria had been met.
“It creates a complication where no other authority can intervene, by law, until that municipality makes a decision,” he said.
Chabane said in future, the performance of departments and institutions may be linked to the performance of the heads of those institutions.
“That will begin to bring accountability,” he said.
Meanwhile Subesh Pillay, chairperson of the South African Local Government Association, said it was important to remember that clean audits were a means to an end.
“That end is to ensure that local government become efficient and effective organs of service delivery,” he said.
- Mid-term budget: The wingless fairy godfather gives SA a pep talk (dailymaverick.co.za)
- Gordhan stands ground on spending (iol.co.za)
- Gordhan Scrambles to Reassure Investors on South African Budget – Bloomberg (bloomberg.com)
- Gordhan Reins in South African Spending to Restore Confidence – Bloomberg (bloomberg.com)
- Gordhan Set to Widen South Africa Budget Gap in Credibility Test – Bloomberg (bloomberg.com)