Economic Governance and Management: input from Public Service Commission and Chamber of Commerce and Industry SA

ECONOMIC GOVERNANCE AND MANAGEMENT AD HOC JOINT COMMITTEE
3 November 2005
AFRICAN PEER-REVIEW MECHANISM: PUBLIC SERVICE COMMISSION AND CHAMBER OF COMMERCE AND INDUSTRY SA BRIEFINGS

Chairperson: Mr V Smith (ANC)

Documents handed out:
Public Service Commission on Promoting Sound Financial Management: PowerPoint presentation
Public Service Commission on Fighting Corruption: PowerPoint presentation
Chamber of Commerce and Industry in SA briefing

Summary
The purpose of the meeting was to aid the Committee in preparing a report on South Africa’s readiness for economic governance and management as part of the African Peer Review Mechanism (APRM. Presentations were given on Promoting Sound Financial Management and Fighting Corruption from the Public Service Commission (PSC) and the Chamber of Commerce and Industry in SA (CHAMSA).

MINUTES

Public Service Commission on Promoting Sound Financial Management briefing
Mr A Simpson (Department of Public Services and Administration, Acting Deputy Director-General) stated that the public expected government to operate in an open, transparent and accountable manner. This expectation included effective accountability in respect of public funds, and the management of government programmes and services. In discussion of sound financial management, the PSC would focus on the two areas with which it was involved, namely promoting the constitutional principle that public administration be accountable, and reporting on financial misconduct in the public service.

Mr Simpson gave a summary of the PSC comments on the accountability of the public administration in the 2005 State of the Public Service Report. These included that:
- the Department had continued to set over-ambitious targets;
- the work of public service entities should be better defined,
- performance indicators should be better formulated;
- 11 national departments had received unqualified reports from the Auditor-General in 2003/4 (an increase from previous years);
- at the provincial level, the number of unqualified reports had decreased in the health, education and social development sectors;
- all public service institutions should have adequate control systems in place;
- regular and accurate reports on progress should be provided in the public domain, and
- key stakeholders should hold government accountable for performance and the use of public funds.

As required by the Public Finance Management Act (PFMA), departments had been reporting finalised financial misconduct cases to the PSC since the 2001/02 financial year. Reports on financial misconduct had been produced on an annual basis since this date.

The legislative framework was then set out. Section 85(1)(a) of the PFMA determined that the Minister could make regulations prescribing the manner, form and circumstances in which allegations and disciplinary and criminal charges of financial misconduct be reported to the National Treasury, the relevant Provincial Treasury and the Auditor-General.

He also gave a statistical overview of the number of officials charged with financial misconduct; the types of financial misconduct cases reported; and the levels of the employees charged with financial misconduct. The presentation concluded by emphasising that such statistics should not only be viewed from a negative perspective. There would be more cause for concern if a very small number of cases were reported.

Discussion
Ms J Semple (DA) asked what was meant by the comment that the Department had continued to set over-ambitious targets in the State of the Public Service Report 2005.

The Chairperson said that the process of disciplining was not simple. There had been cases of public service employees on suspension of three of four years with pay. How was this being managed? Justice delayed could be justice denied. He also asked whether the jurisdiction of the PSC covered the local as well as national and provincial levels. If not, was there a different body for this? Often where government departments were required to give reports, these either did not arrive or were late. Was this happening and if so, would these delays distort the picture?

Mr Simpson answered that the over-ambitious targets were those set by the Department in strategic plans. As for the suspension with pay, departments were encouraged to deal with misconduct cases expeditiously. A maximum period of 30 days from charge to conclusion of investigation was encouraged. The extent to which this was complied with was not known. Jurisdiction was limited to national and provincial levels. There were delays in reporting and this was a problem for many institutions requiring reports such as the National Treasury and the A-G.

Professor S Sangweni (PSC Chairperson) added that suspension with pay was a difficult area. The PSC had compiled a guideline document and had distributed this throughout the system. This included the suggested 30-day timeframe. Although the jurisdiction of the PSC did not cover local level, the Constitutional principles of Section 195 applied throughout the public service.

Public Service Commission on Fighting Corruption briefing
This presentation provided an overview of the Government’s strategy against corruption and highlighted the PSC’s involvement. The Public Service Anti-Corruption Strategy adopted in 2002 contained nine considerations that were inter-related and mutually supportive. These were:
- consolidation of the legislative framework;
- the establishment of appropriate mechanisms to co-ordinate and integrate anti-corruption work;
- improved access to report wrongdoing and protection of whistleblowers and witnesses;
- the prohibition of corrupt individuals and businesses;
- the improvement of management policies and practices;
- the management of professional ethics;
- increased partnerships with stakeholders;
- encouragement of all sectors to undertake ongoing analysis of the trends, causes and impact of corruption and to advocate preventive measures; and
- increased awareness, training and education to support the above developments and the launch of a public communication campaign.

The legislative framework in support of this was then outlined.
- The Protected Disclosures Act of 2000 sought to protect whistleblowers in both the public and private sectors from suffering victimisation in the workplace.
- The Promotion of Administrative Justice Act 2000 provided that organs of state could be held accountable for any decision taken on behalf of its citizens, and that any negative decision should be accounted for in writing.
- The Promotion of Access to Information Act 2000 aimed to promote transparency both within the public and private sectors.
- The Financial Intelligence Centre Act 2001 legislated to combat money laundering by compelling all financial institutions to make reports.

Under the Financial Disclosure Framework, all senior managers in the public service had to disclose their financial interests to the PSC on an annual basis. The National Anti-Corruption Hotline was managed by the PSC. As part of ethics management in the public service, the PSC had been involved in extensive training and promotion of the Code of Conduct for public servants since its issue in 1997. An explanatory manual had been sent out in 2003. The PSC had been a key roleplayer in arranging the first and second National Anti-Corruption Summits. At the Second Anti-Corruption Summit, various action-oriented resolutions had been adopted. These were set out in full under the headings of Ethics, Awareness and Prevention; Combating; and Oversight, Transparency and Accountability. The PSC also provided secretarial support to the National Anti-Corruption Forum (NACF). Emanating from the Summit, a National Programme against corruption had been launched by the NACF. The PSC would be involved in some of the joint projects under this programme.

The majority of interventions of the PSC focussed on the prevention of corruption. However, it also had direct involvement in the combating of corruption. Other existing anti-corruption measures were the Anti-Corruption Co-ordination Committee; the Directorate of Special Operations; the Asset Forfeiture Unit; and a Supply Chain Management system developed by the National Treasury.

Discussion
Ms Semple (DA) asked that the proposed ‘supply chain management’ be further explained.

Mr L Greyling (ID) asked whether Government was ‘winning the battle’ against corruption. What was the extent of the problem? Were the changes within tendering procedures at the local level working, particularly with reference to the PFMA and the Municipal Finances Management Act (MFMA)?

The Chairperson stated that a recent survey had put SA as the 24th worst country for corruption. He had noted Professor Sangweni had a different view. He also asked whether the disclosure required of civil servants would be placed on a public register that the public could access.

Ms Semple said that there were often allegations that those tendering had relationships with the bodies accepting tenders. How was this monitored?

Mr D Gumede (ANC) asked how South Africa had fared in relation to international standards on transparency.

Professor Sangweni replied that a Non-governmental Organisation (NGO) based in Germany had organised an anti-corruption conference that had developed a ‘corruption perception index’. Business individuals were approached and asked their perception of the level of different country’s government corruption. He took issue with this methodology and felt it was an inadequate basis for providing such information. An interesting survey had also been conducted by the Integrity Centre in Washington that looked at corruption on a broader basis, including for instance, such indicators as legislation and social development. South Africa was among the top countries with the strongest integrity in this assessment.

The disclosures made by civil servants under the Public Service Act required disclosures to be made to the PSC. The PSC was then the custodian of the register and this was available for scrutiny but only under certain conditions.

Professor Sangweni continued that it was difficult to monitor the tendering for contracts. Under the Supply Chain Management Programme, there was a requirement that a procedure for how tender procurement policies were managed be established. A project had been undertaken in co-ordination with the A-G on this subject. It had been discovered that civil servants in key positions were involved in companies that had secured tenders. The exercise was not yet complete and was yet to be published.

Mr D Maphumulo (Department Deputy Director-General) said that a register of companies should be used so that it was easy to see the shareholders of each company and ascertain any conflicting interests. Individuals should be made to sign a declaration stating they did not have interests in companies submitting tenders.

Dr Maharaj (Provincial Services Commissioner: Western Cape) said it should be remembered that out of a million public servants, only around 500 cases a year had been reported. South Africa was also close to 100% in its record of compliance with United Nations conventions in this area.

Chamber of Commerce and Industry in South Africa briefing
Ms P Drodskie (CHAMSA Director of Policy and Advocacy) said the Chamber was an umbrella body representing a number of organisations. The Constitution and the regulatory environment of South Africa were superior to many other countries in both developed and developing worlds, but there was room for improvement. Businesses were supportive of a market economy with minimum regulation and government interference. Although it was accepted that regulators were necessary for the oversight of certain monopolistic bodies, and for State-owned Enterprises (SOEs), these should be independent and free from political interference. The problem with regulators was that the well-paid professionals needed were generally financed by a levy on the industry. This was an additional cost to business. There might be certain situations where an ombud was more appropriate.

The promotion and development of macro-economic policies supporting sustainable development was imperative. In the development of policy and of position papers, the consultative processes with business could be improved. At present, they were more prescriptive than consultative. There was a proposal for two inter-related initiatives that would improve the regulatory environment. These were the reduction of regulatory compliance costs and the introduction of a system of regulatory impact assessment to assess costs of imposed business regulations. A number of key regulatory areas that were perceived as causing unnecessary red tape for doing business were also highlighted.

On the issue of promoting sound financial management, they acknowledged that the government had taken steps to combat mismanagement of funds. There was concern at the frequency at which such issues appeared in the media, particularly at local government level.

On the issue of local government, service delivery needed improvement. The application of public funds and appropriate systems of checks and balances were clearly not working. Improved systems were needed to ensure that mismanagement and fraud/corruption were dealt with.

It was accepted that corruption and money laundering was not limited to the public sector, and that there was a need to eliminate these practices. However, the current system of checks and balances was very onerous and added a great deal of administrative burden on businesses and legal institutions. This added to costs. In order to accelerate regional integration, harmonising investment policies and customs regimes was imperative. The Southern Africa Development Community (SADC) protocols provided a sound foundation but these were taking a long time to be implemented.

The importance of Small-, Medium-, and Micro-Enterprises (SMMEs) to South Africa’s economy needed to be emphasised. This was vital for new opportunities and the empowerment of the populations. Suggestions for better integration were also set out.

Concerns were raised about the administered prices of SOEs. While such prices had been beneficial in the past, the time would come for substantial increases in tariffs. It was difficult for businesses to budget in the face of such changes.

The A-G’s report for 2003/4 had stated that losses had been sustained by many of the 192 SOEs. These were being subsidised by state funds. There was a need to ascertain whether there were private sector enterprises that could turn these into profit-generating organisations.

The Black Economic Empowerment programme was very important for South Africa. However, the pace at which education and training were taking place was too slow to make this a meaningful reality. The emphasis on science and technology was welcomed. CHAMSA supported the African Peer Review Mechanism (APRM) and felt this would send a positive message to stakeholders.

Adv K Warren (SA Chambers of Business: Parliament Policy Executive) added that local government was the ‘Achilles heel’ of this state. The perceived non-delivery of services was fermenting unrest. There was no point having such programmes in place if the local governments could not deliver. Efforts had to be made to strengthen local government capacity.

Discussion
Mr Gumede asked for clarification on ‘minimum government interference’ in alleviating poverty, inequality, labour and health problems. The Chairperson said this was likely to be the ‘hub’ of the discussion and asked whether CHAMSA participated in NEDLAC. If so, what was the mood there?

Mr Greyling said there was a tension between businesses wanting less regulation and taxes, and addressing the wider challenges of society. What was the best way forward in terms of the social contract?

Ms Drodskie said that CHAMSA did not advocate no regulation, and accepted that certain regulation was necessary to enable policies in the areas noted. It was over-regulation adding to business costs that was the area of concern. If these were reduced and businesses were allowed to make greater profits this would provide the government with more taxes. The more profitable the economy, the lower taxes could be. There was heated debate between business and labour views in NEDLAC on privatisation. The outcome was not known at this stage. As to the best way forward, this was very difficult to answer.

Mr Warren repeated that the answer was to strengthen local government. He also emphasised that minimum government interference led to maximum economic benefit. Over-regulation should be avoided. The issue of labour was at the forefront of this debate. CHAMSA believed that both business and labour could benefit by relaxation of stringent labour regulations. Economic impact assessments needed to be looked at carefully.

Mr Greyling asked if government had a strong industrial policy. Were there particular sectors they should be looking to invest in? Had they done enough to stimulate investment? He also asked about trade liberalisation, noting that tariffs had been heavily reduced over the last 11 years.

Mr Warren replied that he was not well placed to deal with industrial policy, but the Department of Trade and Industry had produced a number of discussion papers. Broadly, CHAMSA supported these initiatives. There had been criticisms on implementation but he was not able to give an informed opinion on this. Ms Drodskie added that they supported trade liberalisation but strong anti-dumping laws were a necessary corollary.

The meeting was adjourned.