SA economy bleeds billions

2015-11-26 12:00
Angry commuters protest the implementation of taxi cards at the entrance to France.

Angry commuters protest the implementation of taxi cards at the entrance to France. (Ian Carbutt, The Witness)

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Pietermaritzburg - Poor oversight in procurement has seen the country rack up a monumental R25 billion in irregular expenditure, while a lack of any consequence makes the national fiscus vulnerable, says the auditor-general’s office.

Auditor-General (AG) Kimi Makwetu also reprimanded the country’s leadership, saying that while there had been “marginal improvement”, the government could have recorded a “higher margin of improved results” had “leadership stepped up the pace in addressing internal control deficiencies identified in the previous audit”.

Irregular state spending jumped from R27,4 billion in the 2012/2013 financial year, to R62,7 billion for 2013/2014.

The AG found that although the 2014/15 figure was lower than for the previous period, it was still too high.

One of the more bizarre findings was the R32 million included in the total of R936 million deemed “fruitless and wasteful expenditure”, which was ironically spent to “prevent further fruitless and wasteful expenditure”.

The 2014/15 PFMA consolidated general report on national and provincial audit outcomes covered 468 state-funded entities, including 167 national and provincial departments, with a total budget of R1,1 trillion (a million millon) and was released yesterday.

“Stepping up the pace is about consistently narrowing the space for possible errors or abuse in handling public resources through leadership-driven efforts,” said Makwetu.

The key indicators scrutinised were financial statements, performance indicators and legislative compliance.

The provinces with the most clean audits were the Western Cape (83%), followed by Gauteng (54%), Free State (32%) and KwaZulu-Natal (22%).

The AG said the education, health and public works sectors still had the worst outcomes.

His report said basic and higher education had a combined budget of R257 billion, health R146 billion) and public works R32 billion.

“There should be a focus on these departments to ensure a meaningful movement towards accurate, accountable and transparent financial and performance reporting. This should be underpinned by sound internal controls and good human resource management, including enhancing personal accountability and consequence management,” said Makwetu.

He said the key driver was that many “do not follow competitive or fair procurement processes” in their supply chain management, which contributed largely to the irregular expenditure of R25,7 billion.

Makwetu clarified that while this did not immediately mean the money was wasted or that fraud was committed, it could nevertheless threaten the public purse.

“The absence of follow-up and real consequences … creates more vulnerability for the control weaknesses to be taken advantage of, resulting in possible significant losses to the fiscus.”

He said the root cause of poor audit outcomes was that 73% of entities were slow in improving key controls and addressing risk areas.

“Instability or vacancies in key positions remained the second highest root cause of findings [while] consequences for poor performance and transgressions … were inadequate.

“The status of human resource management remains poor in most provinces.”

His report emphasised the role of leadership towards strengthening the controls.

“We are still convinced that with more firm, resolute action and ongoing support from leadership, these audit deficiencies could easily be addressed,” said the auditor-general.


FOR KwaZulu-Natal, there were several bright spots, with the province’s leadership being called “responsive, disciplined and hands-on”.

But worryingly, the KZN Legislature, the heart of government in the province, was the only legislative house in the country that obtained a qualified opinion.

Meanwhile, irregular expenditure was down by 60% to R1,7 billion, largely as result of the Education Department reducing its irregular expenditure from R2,6 billion to R448 million.

The Health Department was responsible for 90% of the province’s unauthorised expenditure of R143 million, although overall the figure was down significantly from R685 million the previous year.

“Our analysis indicated that the political and administrative leadership has the will and zest to improve the provincial landscape by promoting accountability and good governance, and by holding officials in positions of stewardship to account.

“With this being said, the province is destined to realise better audit outcomes in the year ahead,” said the AG’s office.

The province’s total budgeted expenditure was R97 billion, of which R52 billion went to employee costs.

However, the Education, Health and Transport departments, which manage 82% of the provincial budget between them, all had negative findings against them.

Read more on:    pietermaritzburg  |  economy

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