KZN govt's wayward children

2012-05-10 00:00

IN many developed countries, globalisation has contributed to an expansion of the private sector, allowing it to function as the main engine of economic growth and job creation. The same trend has led to the downsizing of the public sector, with disinvestment in a large number of public enterprises.

By contrast, public enterprises in Sub-Saharan Africa remain the focus of state-led development and a major source of employment due to the slow growth of the private sector. But even here, it is crucial that public enterprises should perform their functions efficiently and effectively and, where appropriate, under market conditions.

KZN’s two dozen public entities, the bulk of which are attached to the Department of Economic Development and Tourism, have taken on a life of their own. Some, such as Ithala and its subsidiaries, have become another bureaucracy, plagued by ineffectiveness, inefficiency, incompetence and corruption. Many, such as Tourism KZN, have no clear measurable targets or sufficient performance-monitoring mechanisms.

Issues pertaining to financial management, performance and corruption in the audit outcomes for KZN’s public entities for the 2010/2011 financial year — the latest available for scrutiny — are a case in point. Although the audit outcomes for these public entities are improving, the overall scores for the province fall behind those for the national public entities which have been operating with around 90% without audit qualifications for the past three years.

Material losses and material impairment of assets incurred by the provincial public entities far exceed the corresponding figures for KZN’s government departments and they mostly result from irrecoverable debt. This is an indictment on the quality of the financial management as well as the leadership within the executive authority in the departments responsible for these public entities.

The numbers of corruption probes in Ithala and Ithala Development Finance Corporation are on a par with the figures for the provincial Department of Education which is a major service delivery agency with the single largest budget. The lack of clarity regarding value for money and performance in sustainable job creation by the KZN Growth Fund is an ongoing concern given the flat budget allocation this public entity receives every year.

What is needed is a directive to the accounting officers in public entities that they will face misconduct charges for negligence if they fail to implement the prescripts of the Public Finance Management Act. The MECs should expect to be called to account for the performance of the public entities under their watch.

Similarly, the latest budget hearings for KZN’s public entities have revealed that many of these trends are set to continue. Where fiscal austerity has affected the province’s public entities, this has been at the expense of service delivery with the compensation of employees unchanged in real terms and vastly increased as a proportion of total expenditure.

Ezemvelo KZN Wildlife, whose job is to maintain many of our resorts and reserves, seems incapable of marketing them effectively enough to keep its subsidised operations afloat in a market where many privately owned game reserves are turning a profit. The list of dubious management practices goes on, calling into question the rationale, purpose and effectiveness of many other public entities. The provincial government should be asking if there is still a justification for their further existence in state ownership.

The Office of the Premier should embark on a review of all public entities attached to various government departments to assess their performance and determine whether or not they are still fulfilling their legislative mandate, whether they are still relevant to the government’s overall policy approach and whether they justify the increasing budget allocations earmarked for them.

Based on the outcome of such an assessment, one would anticipate far-reaching reforms in the funding and management of all public entities, particularly with regards to the number of employees and remuneration of managers. If the government decides to keep them in state ownership, serious consideration should be given to the need for reforming their internal structures, governance and operations in ways which ensure that KZN’s public entities pursue clear and measurable objectives.

MEC for finance

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