Ethical government: South Africa is all at sea

This is a follow-up to my previous blog "Reply to Helen Zille: Bad Governance affects the Western Cape too".

A ship provides a good example of how organisations should run.  If the captain, executive officers and crew don’t do their jobs, and strictly follow protocol, it could lead to calamity. 

On June 17 the United States Navy destroyer Fitzgerald collided with a freighter off Japan.  Seven sailors on the American ship died.  The captain, his executive officer and the senior enlisted sailor were fired, and a dozen sailors, including those on watch, were disciplined. The freighter’s role in the collision in the busy shipping route is unclear, but the US’ Seventh Fleet in Japan said “inadequate leadership” on the Fitzgerald contributed to the collision.  (This is the fifth collision this year involving the Seventh Fleet.)

British politicians resign on the whiff of scandal.  This month international development secretary Priti Patel resigned over an unsanctioned, “secret” meeting with Israeli politicians; defence secretary Michael Fallon over a sexual harassment scandal and in August, shadow equalities minister Sarah Champion resigned over a controversial article she wrote.  That’s just this year.

Compare that to South African politicians and officials who not only deny wrongdoing – corrupt and alleged corrupt activities, unsanctioned trips and meetings, tender and contract irregularities, abuse of state resources, violation of the law, etc – but brazen it out, determined to hold onto their titles and posts, blaming everyone else for their predicaments. 

British politicians may not be morally superior (“politicians could rationalise the Crucifixion of Christ”, novelist John Sandford) to South African but they understand and take their oaths of office and personal accountability seriously. They don’t wait to be told – they go of their own volition.

But very few local politicians and officials resign or are fired because of incompetence, malfeasance or scandal, and if they do or are, it’s only after a period of time, denials and Sturm und Drang.  Even if they are doing a good job, they may be fired merely for crossing their masters, as with former finance ministers Nhlanhla Nene and Pravin Gordhan, while the incompetent get to remain.

#GuptaLeaks and Jacques Pauw’s sensational book The President’s Keepers are recent reminders in a long list that South Africa has sunk into the depths of unchecked criminality – a near-criminal state we had previously reserved for places like Nigeria and Zimbabwe.  While most of it concerns the ruling party by virtue of their absolute control of state institutions and through cadre deployment, “public sector inefficiencies”, to euphemistically call governance problems and challenges, are systemic since the dawn of democracy. 

Perhaps the most significant factor for “service delivery” problems in the first five years post-1994 was wide-scale cadre deployment and affirmative action as government too hastily tried to get racial demographics right.  They replaced usually white, Afrikaners with inexperienced and unqualified black officials, including ANC-member managers. At the time it led to an irreplaceable loss of institutional memory.  Today, it’s misleading to call it “lack of skills”.  Too often politics, in-fighting and cadres jockeying for positions get in the way of performance, which contribute to skilled and dedicated people leaving. Notable examples are at state enterprises and, as Pauw writes, SA Revenue Service.

David Fourie and Wayne Poggenpoel (2016, “Public Sector Inefficiencies: Are we addressing root causes?”, South African Journal of Accounting Research, http://dx.doi.org/10.1080/10291954.2016.1160197) reviewed Public Service Commission and auditor-general (AG) reports from 2004 to 2013 to determine the root causes of inefficiencies. They reviewed six “themes” – ethics, resource optimisation, service delivery, compliance, transparency and accountability and expenditure management, and the number of years findings recurred over the period for each theme. Their findings are summarised as follows:

	No. of years finding recurred 2004 - 2013
THEME 1: Ethics
1. Weak investigation capacity to deal with financial misconduct	5
2. Senior managers not disclosing financial interests	8
3. Inadequate implementation of ethics infrastructure	3
THEME 2: Resource Optimisation
4. Resources not optimally used	6
5. Unauthorised, unauthorised and irregular expenditure	7
6. Inadequate management of poor performance	8
THEME 3: Service Delivery
7. Inadequate implementation of poverty alleviation programmes	4
8. Dispersed and fragmented public service	3
9. Performance-related inefficiencies	4
THEME 4: Compliance
10. Non-compliance with Promotion of Administrative Justice Act	7
11. Women and people with disabilities nor represented	4
12. Non-compliance with financial regulation	4
THEME 5: Transparency and Accountability
13. Qualified audit opinions	9
14. Annual reports not clear or understandable to the public	5
15. Challenges accessing government information	5
THEME 6: Expenditure Management
16. Uncompetitive or unfair procurement processes	9
17. Contract management inadequacies	8
18. Internal control deficiencies	9

In five of the six themes the public sector scores poorly in terms of the number of years the findings recurred, with expenditure management recurring (almost) every year. Non-compliance with the Promotion of Administrative Justice Act (and Batho Pele), which recurred seven out of nine years, is important because, apart from service delivery, this is the public’s point of contact with the public service and officials.

Government and particularly the DA-run Western Cape, City of Cape Town and municipalities place great emphasis on “clean audits” (financially unqualified and compliant with legislation). While it’s an important indicator of sound financial management per se, the emphasis is misplaced because other areas like ethics, overall legislative compliance and accountability and transparency are expediently overlooked or relegated somewhere down the list of priorities.  Clean audits are not the only, absolute indicator of good governance.

They and the public overemphasise the importance of audit outcomes because they misunderstand the purpose and nature of financial audits. Two years ago Premier Helen Zille famously stated the system of government audits must be changed because of a sampling anomaly of 210 books during the audit of the Western Cape’s provincial library service. Then and more recently she claimed meeting the AG’s requirements of a clean audit was too onerous and hampered service delivery – “officials are not prepared to face the auditor-general’s wrath for purchasing a solution that does not comply exactly with the specifications or produce the required result”.

Zille proposed changing the system of audits, which is based on international auditing standards, because her administration finds Treasury’s financial policies onerous.  This shows ignorance of the function of financial audits, which is to assess the fair presentation of the financial statements, and that the auditor is simply a consultant required by law (for public companies and government) to review the accounting system and records and make findings and recommendations thereof. It’s management’s responsibility to implement, and if desired and necessary, change the accounting system and policies.

Writing about the country’s “broken policy system” Luke Jordan says, “We have relegated almost all review processes to the Auditor-General. Auditors are important, but as process specialists they are not qualified to diagnose or engage on detailed substantive errors” (emphasis added).  This statement supports my view politicians and public mistakenly believe the AG not only implements government policy, but manages it as well – refer Zille’s spurious statement about the AG’s “wrath”.

An auditor does not assess management’s decision-making prerogative; he’s more concerned about the integrity, based on audit risk factors and other metrics, of the accounting process.  For example, an organisation can have recurring losses, and provided it’s a going concern, still obtain an unqualified audit even if management made decisions that led to the losses.  A financial audit is more about the quantitative than the qualitative, of which legislative compliance is a factor.  So unless there’s no fraud and error, or it’s materially insignificant, and the organisation has complied with the process, an unqualified audit is relatively easy to obtain. 

While much attention is given to the public sector’s audit outcomes, little is paid to its overall ethical compliance – non-disclosure of financial interests, management of poor performance, compliance with Promotion of Administrative Justice Act and Batho Pele and other laws, accountability and transparency, i.e., qualitative, non-financial indicators.  These are the other, equally important factors of good governance.

It’s common cause the ruling party is terminally corrupt.  One has only to read the latest headline, books like Jacques Pauw’s and #GuptaLeaks, to confirm another scandal in the making and what we knew or suspected.  But corruption starts with the failure to observe ethical codes of conduct and the violation of laws.  It’s happening throughout the public service. 

And contrary to what the DA and its supporters believe, the putative government-in-waiting is not the champion of good governance.  In the province it governs, when it’s politically convenient, it has shown willingness and tendency to violate the principles of good governance, secure in comfort in the mistaken belief the number of clean audits it obtains is the only worthwhile measure.  Well, it’s not.  Their obsession with this at the expense of other indicators does not bode well for their future rule in the Western Cape, and if it gets to that, South Africa.

South Africa’s public sector and government has not, and I don’t think ever will, reach the stage where politicians and officials resign at the suggestion of inappropriate behaviour, not to mention prima facie evidence of offences. Like the captain and crew of the US Navy’s destroyer, it continually displays “inadequate leadership”. 

But without an effective and impartial prosecutorial or disciplinary oversight, and a deluded, overstated belief in their own abilities, there’s no reason for them to take corrective action.  So keep a weather eye on the horizon for more calamities.

*Since writing this, I confirmed the Western Cape's health's head of department, the most senior person after the MEC (provincial minister), got to investigate a complaint against her and other officials herself with the official approval of her bosses, the MEC and premier.  This is illustration, one of numerous of the dire state of governance in the province.