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  • Public Sector spending: Allow transparency to help stop corruption
Articles:

Public Sector spending: Allow transparency to help stop corruption

05 July 2021

Yugen Pillay, Head of Public Sector |

Having a clear view to anything is the best view to have and perhaps the most informative. It allows us the opportunity to stay engaged whilst knowing in which direction we are moving. Why then, do we often accept a somewhat opaque view to many events and issues and even spending? Or is it something that’s thrust upon us from those on the other side?

Over the last five years I have witnessed some countries become more inwardly focused and while this change may have been led by their citizens, it has become clear that it’s the citizens themselves who are requiring more and more transparency. Citizens want to know exactly what is going on in government, why things are happening the way they are and, more importantly, how changes in legislation and spending are going to affect them. It is therefore becoming ever clearer that citizens need to be the center of attention when it comes to decision-making. The question must then be asked: are Governments engaging their citizens at the right level to ensure there is sufficient transparency and if transparency is lacking, is corruption flourishing?

The fact is transparency or the lack thereof is what drives corruption. According to the latest Transparency International Report approximately 120 countries fall below the 50% mark1, which means that these countries are more corrupt in the public sector, than clean. A shocking statistic indeed, which, coupled with the finding that “most countries have made little to no progress in tackling corruption in nearly a decade1”, is even more cause for concern.

South Africa is no stranger to the lack of transparency and the corruption that comes with it. Over the last few years, we’ve witnessed the blatant plunder of public finances from the likes of Eskom, Transnet and even SAA. Whilst some have tried to quantify the extent of losses in the public sector, it is nearly impossible to do so with current resources. What we do know is that money lost to corruption has far-reaching knock-on effects on our economy. It hampers service delivery in vital pillars such as health, education and security and impacts infrastructure development which is crucial to economic growth.   

The latest report on National, Provincial Government and Entities, released by the Office of the Auditor General (AGSA), puts unauthorised, irregular, and fruitless and wasteful expenditure (UIFW) at R74 billion2. And if we look at the past three years, a total of R200 billion of UIFW has been incurred by public institutions (excluding local government institutions) around the country. Just last week the Standing Committee on Public Accounts (SCOPA) requested a forensic investigation be done at the Compensation Fund, partly because of the continued IFWE incurred by the Fund year in and year out3. And whilst the question on corruption was asked and inferred, nothing will be known until the forensic investigation is completed.

This pattern of investigating is not new to us South Africans. Over the years we’ve witnessed many investigations, enquiries and commissions. Currently the Zondo commission seeks to understand exactly what happened at certain parastatals, involving some previous cabinet ministers, as well as clarity with a certain controversial family and their ties to government.

However, all these investigations and commissions have one fundamental common trait. All of them aim to understand and seek clarity on apparent fraud or corruption of past events, which were not transparent enough from the outset. Whilst the wheels of justice are slowly turning in response to what is revealed at these commissions, the funds in question have already been spent or, worse, have left the country. Our budget deficit tells us that we just don’t have funds available to continue turning a blind eye to corruption but more importantly, why would we continuously condone the awarding of contracts which are irregular in nature?       

The Public Finance Management Act (PFMA) has been in effect for more than 20 years and yet we still see material irregular expenditure being incurred by public institutions. It is time that we demand more transparency in the supply chain and procurement processes at public institutions. It is time for legislation be updated to allow for greater transparency during the supply chain and procurement process. The resulting greater transparency will serve as an early warning system and could well reduce irregular spending and the unacceptably high levels of corruption we are currently witnessing.

To enable this greater transparency, part of the solution must be to perform probity audits on the supply chain management process. A probity audit is an assurance engagement, in which a probity auditor provides an independent scrutiny of a procurement process and expresses an objective opinion as to whether the prescribed probity requirements have been adhered to.

Whilst there are only a few entities who have embraced this concept of having an audit at the supply chain management stage it is currently done at the discretion of the entity itself. I believe that legislation must be amended so that it is mandatory for all tenders of at least R50 million and over to have a probity audit done at the supply chain management stage. In fact, one of the key checks which must form part of this audit is identifying any or all connected persons and related parties to the respective entity and Government by the shortlisted tenderers. Another key check which must be done during the probity audit is to determine if the price proposed is in fact reasonable and market related, as far too often prices are inflated to pay kickbacks and fund bribery.  

This probity report must then be submitted simultaneously to the entity itself and to the Auditor General SA (AGSA). With the powers given to the AGSA, this report can be disseminated to our various legal structures so that action (if any) can be taken almost immediately. This early warning system of having mandatory probity audits will certainly reduce irregular spending and especially curtail the current high levels of tenders being awarded through corruption. South Africa currently has the skills and capacity to perform these checks - why is it then that this process is not being implemented? Are we waiting for the next big corruption scandal to emerge or will we only act when our coffers truly run dry?  

In the words of the Transparency International Report on corruption: “Contracting processes must remain open and transparent to combat wrongdoing, identify conflicts of interest and ensure fair pricing”

  1. Transparency International Report on the Corruption Perception Index (2020)
  2. AGSA 2020 audit outcomes report
  3. https://www.timeslive.co.za/politics/2021-05-19-furious-scopa-chair-orders-probe-into-corruption-at-compensation-fund/

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