South Africa

South Africa

2013 budget: The cruellest cut of all – the funds lost to corruption

2013 budget: The cruellest cut of all – the funds lost to corruption

An ordinary South African spoke for the everyman and woman when he beseeched Pravin Gordhan to be ruthless with corruption in an advisory letter to the Finance Minister. In his 2013 budget address Gordhan lectured, but mostly pleaded with government to walk the straight and narrow. He made some pleasing announcements about the war against corruption, but critics said this was not nearly enough to change a graft-riddled status quo. By MANDY DE WAAL.

A perennial of the South African budget speech has been the tips that ordinary people send in, giving voice to their advice for this country’s fiscal management. The 2013 budget announced by Finance Minister Pravin Gordhan in Parliament on Wednesday 27 February was no different, and included counsel from a citizen that must have resonated with every taxpayer who heard the minister’s speech.

“Minister, I won’t be fancy with words or complicated ideas…” the 24-year-old Peter Maibelo Pretoria wrote to Gordhan. “My advice for a healthy and sustainable fiscus is to brutally eradicate corruption, then we will be honoured to pay taxes.”

After reading out Maibelo’s advice, Gordhan said: “Mr Maibelo, I couldn’t agree more. Rooting out corruption requires collective effort from all of us”.

While Gordhan’s budget address contained a strong plea to government to toe the line on corruption, and included the welcome announcement that Kenneth Brown would be the state’s new Chief Procurement Officer and lead a drive to streamline procurement, it didn’t give taxpayers any indication of how much of the budget could be lost to corruption or maladministration.

However, in his alternative budget, the DA Shadow Minister of Finance, Tim Harris, (together with his deputy, David Ross MP, and Wilmot James, the DA Shadow Minister of Trade & Industry) said that some R30 billion of the budget that was lost to corruption and maladministration could be recouped if the opposition party were in the driving seat.

The opposition budget accuses President Jacob Zuma of failing to provide firm proposals (and only giving vague commitments) to fighting crime and corruption, and creating an efficient, professional public service that is free of corruption.

In its alternative budget, the DA states that estimates of the “economic impact of corruption vary, but it is believed that the government procurement budget loses between R25 billion and R30 billion per year to corruption and negligence.”

The DA cites the Auditor General’s reports on National Audit Outcomes which show that “unauthorised, irregular and fruitless and wasteful expenditure by government departments and public entities reached R26.4 billion in 2010/11 (compared to R22.4 billion in 2009/10).”

“A Public Service Commission Report on Corruption in the Public Service discussed in Parliament in November 2012 revealed that in the five years to March 2011, the cost of the corrupt activities of public officials has increased sevenfold (from R130.6 million in 2006/7 to R932.28 million in 2010/2011). Financial misconduct cost the state in excess of R1.5 billion over this period.”

Harris told Daily Maverick shortly after Gordhan’s address that the government wasn’t doing nearly enough to tackle corruption. “You have a culture of the misuse of funds which starts right at the top of the ANC, and I am referring here to very senior leaders within the ANC. Until that changes, corruption in government will not be rooted out. There is a general disregard by senior ANC leaders of the importance of public money being something that is used in the public interest, rather than their own interest,” said Harris.

“It is a question of leadership. While there are still government leaders that appear to act in their own interest rather than the public interest in matters of finance, you will end up with a systemic problem in a political party that spills over, creating a systemic problem in the state,” Harris added.

The shadow minister of finance said there had been a lot of talk on corruption, but consistent state action was absent. “We hear the finance minister making noises about holding accounting officers to account; and there has been this recent naming and shaming across the public service of public service officials – these are all good things, but we’d need to see this applied strongly and consistently across government for us to turn the tide against corruption,” said Harris.

To combat corruption, the DA alternative budget advises the streamlining of government institutions to contain the loss of public funds resulting from corruption and wasteful spending; legislation prohibiting public officials from doing business with the state; the enforcement of criminal charges against officials who contravene the Public Finance
Management Act; the withdrawal of funds from corrupt municipalities; and the co-ordination of infrastructure projects at the highest level.

Goolam Ballim, group chief economist at Standard Bank, doesn’t believe, however, that it is possible to estimate accurately the true extent of state graft or maladministration. “Attempting to estimate the extent of direct and indirect losses by graft or sheer inefficiency is just going to be indescribably difficult,” he said.

“In reality anyone who gives you some estimate would be taking liberties simply because the capacity to loosely gauge direct graft and inefficiencies within government is nigh impossible. If everyone were to take a number and give you that, the number would have a very low confidence attached to it. It is practically impossible to calculate,” Ballim added.

“Anybody who gives you a number will be postulating. In the nature of public finance and governance – we are talking about a million people who form part of the broad government structure, and within that context there is no other entity within SA that has got an expenditure profile in excess of R1 trillion. You are dealing with a monolith, a beast,” the bank’s economist said.

Ballim stressed that it was safe to say that government was functioning sub-optimally by any standard of measure. “The gauge that citizens must apply is to see what they are paying for, and to see if they approve of what they are getting. It sounds like very simple language, but it is effectively a very significant control mechanism for measuring the fairness, the efficiency and the legitimacy of the national budget statement.”

He said, however, that given the rating downgrades last year, it was fair to argue that the management of the entire fiscal system had many holes that it had delivered a suboptimal performance.

But like Harris and the DA, civil society activist and researcher Hennie van Vuuren said there were many indicators that were important in terms of tracking corruption. Van Vuuren referenced the Auditor General reports, and said the total amount of money involved in irregular spending at national level as well as for public entities had multiplied tenfold over the past five years on record.

“According to the Special Investigations Unit (2011) more than R25 billion of the government’s procurement budget is lost to corruption, incompetence, and negligence each year. This is about 20% of the state’s procurement budget that is ‘lost’,” he added.

“The total reported irregular, fruitless and wasteful expenditure by provincial and national government identified by the AG and the SIU in 2010/11 could have been used to effectively double the income of the 7-10 million poorest South Africans,” said van Vuuren.

“All these figures suggest an upward trend, and the figures are deeply worrying. The Minister of Finance made important points about the standardisation of costs so, we don’t have massively different costs for the same services, but didn’t go far enough to initiate greater transparency in the public procurement process. If anything is missing, it is the ability to understand who is being awarded state contracts,” said van Vuuren, who is the fellow at the Open Society Foundation for South Africa and co-author (with Paul Holden) of Devil in the Detail.

“There is no reason why the state cannot make all the data on every single procurement above a certain amount available. If Gordhan is serious about engaging broader society in the fight against corruption, then civil society on all levels can play a role in monitoring these procurement contracts more closely – whether they are investigative journalists or people at a local level monitoring the delivery of bricks to a local school. Equally, one of the great checks in the system could be businesses that lose out on competitive contracts, if these procurement contracts were transparent,” he said.

Van Vuuren stated that there was political will to fight corruption, but that the problem was a lack of consistency. “The hard truth is that the war against corruption is consistently inconsistent. At no time do we see that the fight against corruption is consistent. At no time can we argue that everyone who is involved in corruption gets away. It is the inconsistent manner in which justice is enforced, and the political imperatives that seem to so often trump public interest, that undermines the enforcement of anti-corruption measures,” van Vuuren said.

Corruption Watch spokesperson, Bongi Mlangeni, concurs. “The government appears to be talking a lot about corruption, but it seems to be more talk than action. What will be more convincing will be to see an increase in the number of convictions, and to see people who are in management positions being held accountable for corruption,” she said.

Mlangeni explained that the main corruption act, called ‘PreCCA’ (the Prevention and Combating of Corrupt Activities Act) includes a section that clearly states that managers – whether in government or in business – have an obligation to report corruption to the police if they have evidence of that corruption. “Most managers in government don’t even know that this section exists and that they have this obligation under the law. We at Corruption Watch have not heard of a conviction based on this or cases that have been reported to the police based on this law,” said Mlangeni.

“It would be interesting if the government could give information about how many of their managers have come forward to report people suspected of corruption within their department, or to report cases where they are aware of actual cases of evidence. You get a sense that there is a lot of talking about fighting corruption in government, but the actions and evidence send a very different message,” the spokesperson for the corruption busters said.

Similarly (and perhaps predictably) the DA’s Harris stated emphatically that he didn’t have faith that the ANC had the political will to fight corruption properly. “There is just a totally different attitude to this in the ANC, as opposed to the DA. In the DA there is literally zero tolerance. You will be fired the moment there is any evidence of corruption – that is just the way the party works. In the ANC you would need a wholesale attitude in the party right from the top for the ruling party to even begin to be able to tackle this problem, and I don’t see this happening. It is a cultural attitude that stems from the ANC itself, and that is the major blockage.”

Harris’ solution, of course, is for the electorate to vote in a new government.

But until such time as – for whatever reason – there is zero tolerance for corruption in South Africa, let’s postulate that taxpayers are just going to have to grin and bear it: the fact that as much as one rand out of every five they part with in taxes could be paying someone in government’s shoes, house, furniture or new car. DM

Read more:

  • South Africa Delays Plan to Narrow Budget Deficit on Business Week
  • Rating agencies praise prudent budget but warn about debt on BDLive
  • New officer appointed to fight corruption on MoneyWeb
  • Read Pravin Gordhan’s full budget speech at PoliticsWeb
  • Read Tim Harris’ alternate budget statement and download the alternate DA budget at PoliticsWeb

Photo by Reuters.


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