Zondo must act in the public interest

2018-07-01 06:26
Deputy Chief Justice Raymond Zondo. (Alex Mitchley, News24)

Deputy Chief Justice Raymond Zondo. (Alex Mitchley, News24)

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As the arduous process of undoing state capture unfolds, it appears that South Africans are being groomed – if not already accustomed – to acquiesce to the insufferable.

The very antithesis of the stated objectives of, and public expectations from, the unfolding Judicial Commission of Inquiry into Allegations of State Capture, chaired by Deputy Chief Justice Raymond Zondo.

There is still time though to get it right.

South Africa prides itself on world-class judicial and financial systems. Key to the pre-eminence of our financial system are robust oversight and accountability mechanisms.

Yet the country is reeling from the negative effects of social and economic capital destruction, courtesy of former president Jacob Zuma’s administration and the ANC’s weak governance. The full effect of these are neither quantifiable nor irreversible.

The Office of the Auditor-General (AG) was established by the Constitution and mandated to produce annual audit reports on all government departments, public entities, municipalities and public institutions. Clearly these existing oversight and accountability mechanisms, both financial and legislative, failed us, making the state vulnerable to capture.

What is woefully lacking is unrelenting enforcement and consequence management, especially when non-compliance and corruption are flagged during routine financial audits.

Auditors and large audit firms, most notably KPMG and PwC, have their fingerprints plastered all over many transactions where there are allegations of state capture. This is why public trust in institutions, particularly the audit industry, is so low.

What the Zondo commission must do is identify wrongdoing and recommend culprits for prosecution. It is also anticipated that the commission will advise government how to identify and stymie systemic weaknesses. So, the success of the process depends largely on the commission’s ability to do robust investigations. Thus the commission must be able to sustain any legal and moral attacks levelled against it.

Arguably, the most crucial role to the success of the commission is that of lead investigator. And so that lead investigator’s past experiences, associations and conduct must be beyond reproach.

Leading the commission’s investigation team is former AG and SA Institute of Chartered Accountants (Saica) CEO Terence Nombembe.

Nombembe’s academic qualifications and illustrious career notwithstanding, there is a reasonable concern that his impartiality – perceived or real – could be the commission’s Achilles heel.

At all material times when alleged state capture occurred, Nombembe was at the helm of institutions designed to ensure oversight and accountability. These included Nombembe’s earlier role as the government’s “audit czar” and later as head of a watchdog over the auditing industry.

Identifying and addressing systemic weaknesses in the government audit mandate and prevailing legislation over the entire audit industry is potentially the commission’s holy grail.

The commission will probe state-owned enterprises, particularly Eskom and Transnet, as well as government departments and municipal entities where the Gupta family and their acolytes once held sway.

In many instances where audit red flags were raised, ineffective consequences, if any, ensued.

In fairness to Nombembe, the office of the AG is severely impeded in taking corrective measures, owing to legislative weaknesses and systemic challenges that continue to
bedevil it.

Nombembe, though, invited public censure for not doing enough to ensure that wrongdoers were referred for prosecution, which he was expected to do according to the Prevention and Combating of Corrupt Activities Act.

Thus, by omission, it is argued Nombembe contributed to the prevalence of the conditions that ensured that state capture became entrenched.

Nombembe’s current role as the commission’s lead investigator could thus sully the credibility and outcomes of the process.

However, Nombembe could still be a crucial member of the investigations team, and possibly a key witness, because of his financial auditing nous and experience.

The question that Zondo – and possibly the courts – might have to consider is whether a reasonable, objective and informed person would believe that Nombembe will bring an impartial mind to bear.

Whether such an attack eventually succeeds or not is immaterial as any litigation would certainly delay the commission, never mind the credibility costs.

Then there is the concern about Nombembe’s “fitness and properness” due to the failure of Saica, of which he was head, to oversee effectively the auditing industry that is critical to our financial system.

If allegations at an ongoing disciplinary hearing of a prominent member of Saica are credible, senior Saica executives, including its chairman and acting CEO, stand accused of serious moral transgressions.

Incredibly, Nombembe also stands accused of stalling discredited KPMG’s resignation as Saica auditors during his tenure.

Furthermore, Nombembe’s apparent fraternising with, and obliviousness of, those accused of habitual misconduct and the consequent entrenchment of state capture is worrisome.

The parable of the broken window was introduced by French economist and writer Frédéric Bastiat in his 1850 essay, That Which We See and That Which We Do Not See, to illustrate why destruction and the resources spent to recover from it don’t yield a net benefit to society.

The parable seeks to show how opportunity cost, as well as the law of unintended consequences, affect societies in ways that are unseen or often ignored.

From the Public Investment Corporation to VBS Mutual Bank; Marikana to #FeesMustFall; State Security Agency to the SA Revenue Service; SA Social Security Agency to the national public health system; Ngaka Modiri Molema district municipality to the entire North West province; Saica to KPMG; the arms deal to state capture via Nkandla, we tend to let things get worse before we intervene – often at a high cost to society.

With this in mind, the defenestration (the act of throwing someone out of a window) of Nombembe, at least in his current role, would be prudent.

Fearing that those entrusted with public authority lack impartiality must not become a way of life. We have already paid dearly by corruptly procuring arms we didn’t need and could not afford. The ensuing and widely castigated commission of inquiry, currently the subject of a judicial review, added to public strife and penury.

If public interest be the guiding light, then the commission’s composition is vital. Zondo has a duty then to ameliorate this arrangement.

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