Date: 21/09/2005
Source: The Presidency
Title:Mbeki: Anniversary dinner of SA Institute of Chartered Accountants


    Address of the President of South Africa, Thabo Mbeki, at the 25th Anniversary dinner of the South African Institute of Chartered Accountants: Sandton Convention Centre

Programme Director,
The Executive President of SAICA,
The Chairperson of SAICA,
The President of the Association of Black Accountants of South Africa,
The President of the African Women Chartered Accountants,
Ladies and Gentlemen

Thank your very much for inviting me to this important 25th Anniversary celebration dinner of the South African Institute of Chartered Accountants. I trust that what we have all achieved over the last eleven years will inspire you further to position SAICA and the accounting profession to play a central role in helping our country to accomplish its transformation objective of building a united, non-racial, non-sexist, developed and prosperous country, in which all the citizens enjoy a better life.

I was very glad to learn from your Annual Report that, among other things, you have set yourselves the task of engaging in the process of the regeneration of the African continent by, as you say, “assisting in developing the profession in Africa and thereby contributing to economic development… (and that)… This project fits into the continent’s New Partnership for Africa’s Development initiative and aims to assist in building a credible infrastructure within Africa that can support the growth of business in the area”.

Accordingly, I hope that we will continue to look for ways and means of strengthening our collaboration and partnership because both SAICA and the South African government share common objectives with regard to the challenges facing us here at home as well as on the African continent.

As we know, the challenges facing all of us in South Africa include the:

* Eradication of poverty and underdevelopment;
* Economic growth and development and further strengthening of the First Economy;
* Development, modernisation and integration of the Second Economy into the First and ending the marginalisation of those who subsist within this Second Economy;
* Ensuring an integrated approach by all social partners to deal with the challenge of skills development, concentrating on critical fields such as the accounting profession; and,
* Enhancing the process of social cohesion and harmonising various processes at the public, private and community levels to accelerate the building of a non-racial and non-sexist society.

These are very big challenges that obviously could not have been fully addressed in the short space of the eleven years of our freedom. Yet, we have made a good start. In this regard, I am very encouraged by the work that SAICA is doing in its own way and within its own capacities, to respond to some of these challenges, especially on the critical matter of skills development in your profession.

In this context, of particular importance to all of us is the Thuthuka Project, which includes the Thuthuka Bursary Fund – an initiative of SAICA together with the Association for the Advancement of Black Accountants of Southern Africa (ABASA) and the Public Accountants and Auditors Board (PAAB).

Again, I am told that last year, the ABASA, also launched the Nkuhlu Subvention Fund, whose focus is to increase the standard of accountancy in those institutions that attract mainly black students but have a low level of private sector funding.

I am informed that the Nkuhlu Subvention Fund has been able to raise only R2,3 million from the private sector. I think we will agree that we should mobilise more resources to support this initiative.

I believe that your initiatives truly reflect the inspiring spirit of the new South Africans, who are driven by a new patriotism and are therefore ready to join hands to contribute to the reconstruction and development of our country, which includes and must include the eradication of the legacy of racism.

Another of the biggest challenges facing our country and this profession is the promotion of small and medium enterprises. I understand that the International Federation of Accountants is busy with this matter and a report is expected soon. For us as a developing country, we need to pay particular attention to this sector of the economy because it is central to our efforts focused on job creation and economic growth, and therefore the eradication of poverty and underdevelopment.

Further, as we all know, one of the critical elements of our transformation process is the challenge of genuine, broad based black economic empowerment. We welcome your discussions on this matter, which is a vital part of the historic national effort to build a non-racial democracy.

The matter of standards in the profession is linked to the issues of ethics and governance in the accounting and auditing profession. Although we have had our share of corporate failures, we are lucky that these have not been of the scale of such notorious cases as WorldCom, Enron and others in the United States and elsewhere.

However, the challenge remains that we should learn from local and international failures so that we are always better prepared and are able to put in place the necessary mechanisms that would prevent such possibilities. These mechanisms would include constant monitoring and evaluation systems as well as your on-going training and skills programmes.

In this regard, allow me to quote some comments reported by the British journal, The International Development Magazine, published by the United Kingdom Department for International Development. It says:

“Prem Sikka, Professor of Accounting at Essex University…feels that relying on accountants to play a bigger role in identifying fraud is misguided. ‘The government is saying auditors and accountants should become guards of corruption, but what if the guards have their hands in the till?’ This is indeed, a trend that the Financial Action Task Force says is increasing, with ‘accountants services deployed to assist in the disposal of criminal profits’. Ploys include the establishment of shell corporations, trusts and partnerships.”

I am certain that all of us here are determined to ensure that no auditors or accountant in our country should ever put his or her hand in the till!
Government is currently busy with the Auditing Profession Bill and the Corporate Law Review process. This is an attempt to have a dispensation that enhances the independence of the auditors and seeks further to ensure that auditors are held accountable for their conduct. I urge that we should engage this process so that we emerge with legislative framework that embraces all our views.

In his book, “The Roaring Nineties”, the well known economist, Joseph Stiglitz, explains why your profession is important. He says:

“Corporate financial reports are tremendously complicated. That’s why accountants get hired. They are supposed to present profits and losses, and net worth and so on, in standardised ways that can be widely understood. Some argue that capitalism – and the modern corporation – could not have arisen without a reliable accounting industry able to provide a reasonably accurate picture of a firm’s net worth and profits. Without that information, how can anyone assess the value of a firm? Equities are supposed to give the stockholder a share of a firm’s profits; but if the firm could simply make up any old number, who would buy a share?

“Accountants are required in part because shareholders know that they can’t trust firms – there is simply too strong an incentive, even in the presence of fraud laws, to provide misleading information….

“While accountants have long been the butt of jokes (they are widely considered even more boring than economists), they have a difficult and important task. Their responsibility goes beyond the mechanical application of rules.”

I am honoured to wish you a Happy 25th Anniversary and best wishes as you advance towards your 50th Anniversary.

Thank you.

Issued by: The Presidency
21 September 2005