EDITORIAL: A tragedy of fiscal failure foretold
Dutiful financial management isn’t even on the radar of many of our so-called public servants, let alone accountability for messing it up
Another week, another gruesome blood-splattered economic report on the state of SA. In the past week, this particular honour was bestowed on auditor-general Kimi Makwetu’s report on national and provincial governments and their associated entities. It’s nothing less than a paean to financial laxity.
The numbers alone are testament to a government whose book-balancing abilities would seem to be less about balance and more about making book — gambling with the country’s future.
At a quick glance: irregular expenditure clocked in at R62.6bn last year — 21% higher than the previous year. Fruitless and wasteful expenditure amounted to R849m last year, part of a five-year running total of R4.1bn. And nearly a third of public entities, together, made a combined loss (or deficit) of R62bn, as their spending exceeded their income. All of which is money that we’re probably never getting back.
This year, for the first time, Makwetu was given the mandate to report on the rather innocuous-sounding MIs – "material irregularities". An MI is "any noncompliance with, or contravention of, legislation, fraud, theft or a breach of fiduciary duty … that resulted in or is likely to result in a material financial loss, the misuse or loss of a material public resource or substantial harm to a public sector institution or the general public".
This is part of a new process, set up to give Makwetu more powers to ensure accountability. The financial statements of 16 entities (of a possible 432) were identified for this particular audit, and 12 were completed in time for the report. Yet, alarmingly, within just those 12 audits, Makwetu flagged 28 MIs, which led to a loss of R2.81bn to the public purse. The Passenger Rail Agency of SA alone was responsible for R2.2bn.
But the deeper point that emerged from this exercise is that the problem with SA’s public entities isn’t just financial (even though, at this point, we should be counting every cent).
Rather, at its heart, this is an epidemic of ineptitude and careless disregard, spiced up with a fair smattering of duplicity. It would seem that dutiful financial management isn’t even on the radar of many of our so-called public servants, let alone accountability for messing it up.
Consider the fact that only 26% of the entities audited were given a clean bill of health, while 74% of government departments "started the financial year with part of their budget effectively pre-spent". Not one of the 14 state-owned enterprises that were audited received a clean call.
Nor, in fact, did a single entity from within the Free State fiefdom of the ANC’s secretary-general Ace Magashule. Unsurprisingly, the Free State recorded the highest fruitless and wasteful expenditure of all provinces, and 69% of the entities audited there require urgent intervention.
Makwetu’s brutal diagnosis of the Free State is telling, though, truthfully, he could have been speaking about many other places: "A culture of no consequence prevails, and the political leadership is involved in the decision-making at some auditees. The continued disregard for procurement processes resulted in irregular expenditure … and created an environment vulnerable to the abuse of state funds."
When you speak in billions of rand, it may sound a bit like Monopoly money. But the result of the crisis Makwetu describes couldn’t have more of a devastating real-world impact on taxpayers, and the poor, who lose out on services.
The issues raised by Makwetu aren’t new: they’ve been flagged three, sometimes five years running. There’s just been little political will to do anything — and zero consequence for financial overstep. This way, systemic failure lies.