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On the second day of the finance workshop, members of the Committee of the Standing Committee on Finance, got more clarity on the respective mandates and business cases the 16 entities of the National Treasury during their presentations. After the Financial Intelligence Centre, charged with the task of combating illegal possession of money, presented its roles and functions, Mr Geordin Hill-Lewis, a member of the committee, asked if the Financial Intelligence Centre has considered the call for the introduction of lifestyle audits for political office bearers.   

“This idea has been long discussed and now it is an idea whose time has come. And there’s a tender issued for the lifestyle audits. Proactively, on annual and biannual basis,” he said. 

Mr Mike Masiapato, the Executive Manager of Analysis at the Financial Intelligence Centre, responded that “lifestyle audits of public representatives should be performed and a framework should be developed. And if expertise needs should be roped in, that should be done as soon as possible”.

The Government Technical Advisory Centre (GTAC), charged with the planning of government infrastructure project, presented its case as well, after which Mr Lewis-Hill asked why there is a backlog of infrastructure development when infrastructure could be a catalyst for economic development?

“Investment in infrastructure is not coming around, it is facing a near collapse due to no major infrastructure project underway. Worse of all is that municipalities don’t spend their infrastructure fund, which could stimulate economic growth.” 

The Director-General at the National Treasury, Mr Dondo Mogajane, replied that the GTAC is an advisory body, there is currently a debate that its mandate should be relooked. But it has helped municipalities to streamline their projects.  

“The GTAC has helped municipalities to spend on their infrastructure grants. This is a spin-off from the GTAC. As the National Treasury, we are involved in these processes. Normally, it is not a lack of capacity to contact, the problem is the management of these projects. That is where the GTAC expertise comes in.”

He admitted though, that infrastructure spend in municipalities is a challenge. “There is a constant underspending of money that could be used as a catalyst to build the economy.”

The other challenge, in his view, is the ability to appraise and implement infrastructure projects nationally. “Of 43 projects presented to the Treasury, only one got all the ticks for having conducted a feasibility study, that has value for money. The GTAC is helpful in building a pipeline to funds infrastructure projects.” 

According to him, the GTAC has had a special focus on municipal financing and budget benchmarking before it tables its budget. But political challenges at municipal level are abound, he said. “This has led to, among other things, a high staff turnover.”

But through the GTAC, there is now “a panel that has contributed to the improvement of the capacity of municipalities to undertake their infrastructure projects”.  

After the Cooperative Banks Development Agency’s presentation, a member of the committee, Mr Gijimani Skosana, decried its slow pace in creating cooperative banks. “In 12 years of your existence, you only created four cooperative banks. That is not enough when there is so much potential for their growth if we consider the mushrooming of stokvels, which are not catered for by convention banks.”

Mr Jerry Ndumo, the Acting Chairperson of Cooperative Banks Development Agency, said this entity may have existed for so many years, but its model is still at an infant stage. He said it offers an opportunity to cooperatives which could be accommodated by the mainstream banking system. But legislative changes are needed to accommodate these entities, he said. “There are constrains to recruit this capital base. But there lies an opportunity to elevate equity and bring large members of the marginalised sector into the mainstream of the banking sector.”

Capitalisation of the bank is still problematic, he said. “Out of R20 million of our capital expenditure, R16 million goes to the payment of staff, and R4 million is left to fund our projects. That is not enough given the potential of the footprint of cooperative banking in this country.”

There’s a strategy that is charting the future, he said optimistically. We need to have a will to strengthen it and unlock the R44 billion assets in cooperatives. The challenge is that we are competing with a highly advanced commercial banking sector in South Africa.

There is a need to clarify the roles and functions of these financial entities that are established by proclamations and by law. The latter should be established legally so that their roles and functions are clarified, said Mr Floyd Shivambu. “This to do away with issues related to SARS (the South African Revenue Service), which has no board and whose commissioner is elected by the President, but must account elsewhere.”

That responsibility should be clarified. There must be a clear oversight mechanism for such entities by Parliament, he said.

Judge Bernard Ngoepe, the Tax Ombud, underlined this dynamic further when he stated that his entity, charged with the task of protecting the rights of taxpayers and to conduct oversight on SARS, still relies on SARS for resources. This has curtailed the office’s independence. “For example, the commissioner of SARS had to approve my attendance to this workshop. Not only that, there are restricted investigative powers.”

But worse of all, “the status of the office is currently unclear, as now it is a subsidiary of SARS, the very entity we are meant to conduct oversight on. These are, among many, the contradictory dynamics the office is subjected to.”    

The CEO of IRBA (the Independent Regulatory Board of Auditors), Mr Bernard Agulhas, an entity responsible for regulating auditors, explained that the profession has been under tremendous pressure recently due to irregular auditing practices that have emanated from the public sector. As a result, they want to see changes in the profession that will “for the first time regulate not only the auditors, but also the accountants and other stakeholders such as chief financial officers and others who are involved in the auditing chain”.

Mr Kenneth Morolong, a member of the committee, put the effectiveness of IRBA as a regulator under the spotlight when he asked: “What the current and recent developments in the auditing profession, say about the profession?”

Mr Agulhas responded: “We need legislation that will support us, hence we have proposed an amendment of the Auditing Profession Amendment Bill, that will bring about comprehensive regulation, mandatory audit firm rotation and the strengthening of audit committees. These provisions are currently not in place, that is why we are not as effective as we should.”  

Ms Noxolo Abraham, a member of the committee, opined that the absence of the mechanism to regulate accountants should be regarded as a policy gap. “We can do something about that. Make a proposal on what you want to be done, we can as a committee help in that regard.”   

Mr Agulhas agreed: “Yes there is a policy gap there. This is one of the proposals that we made to the ministers. This will cover the missing link in the audit reporting chain.”   

Do you think auditors are prepared to do public sector audits, Mr Wouter Wessels, a member of the committee? asked. Mr Agulhas responded: “Auditors are well-trained to undertake their work even in the public sector. Auditors” ethical behaviour is always at play where there are audit discrepancies. We therefore suggest that there should be an audit firm rotation to discourage a cosy relation between auditors and companies. This as a means to regulate the behaviour of auditors.”   

Given all the financial instruments that the country has at its disposal, the Chairperson of the Standing Committee, Mr Joe Maswanganyi, decried the collapse of big corporates such as Steinhof, Tongaat Hullett, as well as VBS and others due to inefficient auditing practices. He demanded that the committee should get a proper briefing on this. “If we don’t get a briefing about it, it is as if we are not interested in what is happening in our society. We are a Parliament that is overseeing the whole of the republic. Matters that affect the public should be of interest to us.”    

He substantiated why such a briefing is needed. “Thousands of jobs and investments have been lost due to these collapses. We cannot not (we must) be interested in the collapse of big corporates.”

This has an impact on the economy and public investments, he further pointed out. So we will have to find a way to “invite the National Treasury to compile a comprehensive report on this. And to state what are remedial measures to ensure that these occurrences are prevented. We can’t rely on newspaper stories on matters of such national importance.”

Reflecting on the workshop, the Chairperson said the workshop “lived up to our expectations. Now that we know the mandate of these entities, we can now conduct an effective oversight over them. Something that we could not do before this workshop”.

Most of all, he was impressed by the presentations of these entities and the constructive and robust debates that ensued between them and the members of the committee. “We had to engage each other more openly and robustly because these entities have a critical socio-economic role to play in our society.”  

By Abel Mputing

21 August 2019