Fraudsters will feel the full might of the state

2010-10-30 12:37

The Treasury says it’s looking at early detection of tender fraud. Where are you looking and what is possible?
There is a review process under way. In the Treasury, we divide large tenders into stages. We get the Auditor-General to certify that in each stage all the processes were followed accurately.

Secondly, there are certain big-ticket items that can be better procured through a transversal national tender. For example, there is no reason for each province to go out to tender for the acquisition of antiretroviral drugs.

We need one big tender which will allow the government to leverage its buying power and the tender can be audited during each stage.

Heads of department have a responsibility to ensure that internal controls are in place and that they cover procurement.

At the moment the government only investigates once someone complains that they have been robbed.

Where is the possible tender fraud, amounting to at least R25 billion, happening?
Some of the cases involved are with the investigators and others are with the courts. There is a multi-agency team that looks at the allegations and investigates before handing them over to the law-enforcement agencies. This team is made up of the Asset Forfeiture Unit, Specialised Audit Services from the office of the Auditor-General, South African Revenue Service and the Financial Intelligence Centre.

I can’t provide more detail on the nature of these cases because I don’t want to jeopardise the cases.

All I can say is that they involve public servants who may be involved in corruption.

Finance Minister Pravin Gordhan says the government can’t continue to pay suspended employees while their cases drag on indefinitely. Will this not prejudice the accused ­employees?
The issue talks to the heart of government’s disciplinary processes. It is unacceptable that cases can go on for six months to a year. In most instances this happens because managers do not seem to fully understand their responsibilities when initiating disciplinary processes.

The minister referred this to Public Service and Administration Minister Richard Baloyi to ensure that government ­disciplinary process are speeded up. The current situation is not fair to accused people and the taxpayers.

What is the effect of high-ranking government officials’ spending sprees that appear to be unjustified in the face of your message against corruption to civil servants?
High-ranking officials spending lavishly doesn’t help the message. I think the public outrage against spending on cars made everyone think twice. It is very important that the ­officials lead from the front in terms of being frugal.

Are you not concerned that the attempts to root out tender corruption will set Treasury on a collision course with some powerful ANC politicians?
The efforts are against fraud and corruption in government, not against individuals. There are other roleplayers beyond Treasury. This effort has the backing of Cabinet and is driven from the Presidency, the centre of government.

So, if there are people who feel they have to fight us because they are being investigated, they must know that they’ll have to fight the centre of government.

The Treasury forecasts that the economy will grow at 4.4% by 2013. Where will this growth come from?
When we plunged into the recession, private sector ­investment and household consumption contracted.

We see household expenditure rising and, with that, the private sector will invest to meet demand. Interest rates are low and households are repaying debt. This is good news because it means that households are creating space to be able to spend in future.

Secondly, the private sector will be able to invest because the costs of borrowing money are low.

Thirdly, the government’s spending will continue as R811?billion is set to be spent by state-owned enterprises over the next three years.

We also foresee government’s own spending rising by 2.7% over the next three years.

What are the risks that may make it difficult to achieve this growth forecast?
If the global economic recovery falters, it will affect us negatively because the current rise in commodity prices is driven by growth mainly in China and India.

On the domestic front, we have had wages rising faster than inflation. If those wages end up undermining job ­creation, it will weaken households’ ability to spend and that will have an effect on growth.

If interest rates increase in the developed world, we might see capital flowing back to those economies. This will make our bond yields go up and this is a risk to growth.

Where will the five million jobs by 2020 be coming from?
When the economy grew at more than 4%, we created two million jobs. Our calculations show that if the economy grows by 7% over two decades, we will create 500?000 jobs a year. These jobs will come from different sectors as the economy grows.

One of the challenges of unemployment is that people are too discouraged to look for jobs. Some are discouraged because they don’t have transport money to go look for jobs. Can government encourage people not to lose hope?

Most people are discouraged because the jobs are not there. The challenge is that the economy is not creating jobs even for those who have not given up. The economy has just started growing. You will need a couple of growth quarters before the economy starts creating jobs.

There are people who are significantly affected by the costs of searching for jobs. Some have to travel for up to three hours to get to places with opportunities.

Two things would have to happen for such people. You would need to have a ruthlessly efficient transport system that drastically reduces the costs and travel time or you must change the spatial development.

This is a government-wide spatial planning problem. A lot of government land is owned by municipalities. They will play a key role and spatial planning is backed by the right champions within the Cabinet.

Is the current relaxation of exchange controls an ­attempt to attract companies to relocate to the country?
We want companies to see South Africa not just as a place to invest in, but also a place from which you can launch your expansion. It will be very difficult for a company in South Africa to build a case for why it has to relocate because it is easier for them to do business elsewhere.

What lessons has the Treasury learnt from observing other countries’ attempts to dampen the strengthening of their economies? Cosatu is proposing that the government should tax foreign-exchange transactions to deter speculation on currency fluctuations.

South Africa is running a current account deficit. We are investing faster than we are saving. For us to continue with our investment plan, we need foreign savings to come into our economy.

We are also running a budget deficit, which means that we are issuing bonds, which attract flows into the country.

I’m struggling to understand why a country that needs to fund its current account will penalise people who are prepared to assist it.

Brazil has seen investors increase the interest they charge to compensate for the tax they are being charged. Brazil’s latest bond auction failed and this failure coincided with the period they had imposed the tax.

On the other hand, Chile has been successful in imposing the tax because they are running a budget surplus.
We are continuing to purchase reserves.

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