Date: 11/05/2010
Source: The Democratic Alliance
Title: Swart: Speech by DA Member of Parliament on the Finance budget vote, National Assembly

Honourable minister, in your policy statement in the strategic plan of national treasury, you commit yourself to ensuring the proper management of public finances and to step up efforts to fight the scourge of fraud and corruption.

Under the financial and accounting programme in the treasury budget, provision is made for the establishment during 2010/2011 of a special audit unit to focus on developing fraud prevention guidelines for supply chain management processes and providing fraud awareness and investigative capacity to departments.

In the measurable outputs mentioned in the strategic plan, under the heading "internal audit support sub-programme", provision is made for:

Firstly, the department committing itself to the implementation of audit committee guidelines;

Secondly, to conduct internal audit reviews at municipalities;

Thirdly, to report on the status of internal auditing in national and provincial departments and in municipalities;

Fourthly, to support the roll-out of the internalaudit framework and guidelines;

Fifthly, to develop fraud detection guidelines for supply change management processes;

And finally, to provide fraud awareness and investigative capacity to departments.

These objectives of the department are indeed commendable but there are serious challenges in achieving them.

During an investigation by the public service commission into supply chain management transgressions for instance it was found that the number of cases of financial misconduct in national and provincial departments reported to the PSC increased from 771 cases in the 2005/6 financial year to 1042 in the 2006/7 financial year.

In parastatals the situation is equally concerning. Consider for instance the awarding of a contract by Eskom to Hitachi, a company in which ANC Chancellor House holds shares.

Not only was the contract awarded to Hitachi on very dubious grounds but it was done under the then chairpersonship of Mr Valli Moosa, an NEC member of the ANC at the time. The public protector on investigating the case quite correctly found a conflict of interest but as usual no action was taken.

Municipalities are equally bad when it comes to fraud, supply chain management transgressions and perpetrators of unnecessary and wasteful expenditure. In the George municipality for example the internal audit committee conducted investigations into wasteful expenditure incurred by the speaker, found him guilty and recommended that the monies concerned be recouped from him. When the report of the internal audit committee served before council the council reacted by firing the chairperson of the audit committee and took no further action.

From the examples I have quoted it becomes clear that there are two very important requirements to be met to eradicate fraud, corruption, wasteful expenditure and supply chain management transgressions. These are:

Firstly, a clear distinction between party and state; and
Secondly, the independence of audit committees at all levels of government to be guaranteed.

Strengthening the independence of audit committees at all levels of government, including parastatals is therefore important.

Serious consideration should therefore be given to delegate to the special audit unit of national treasury the responsibility for confirming the names of appointees to such audit committees and for authorising the dismissal of any member of such committee . The special audit unit should also be authorised to take the necessary action where a clear distinction between party and state has not been upheld in awarding of tenders.

National Treasury further remains responsible not only for its own budget but also for the compilation of the overall budget of government.

In this regard it is vitally important that treasury ensures the optimum usage of funds available for distribution since choices are difficult when trying to balance the growing needs of the large number of people who have been, and are still waiting in vain for service delivery.

Whereas the DA supports the existence of a social security net for vulnerable members of society, danger signals are starting to develop in that the number of people dependent on the social security net is growing beyond the means of the taxpayers. The current annual budget of R89 billion has to be funded by only 5.3 million taxpayers. If public finances are to be sustainable and properly managed urgent steps must be taken to dismantle the barriers to job creation that government seems determined to maintain by way of a closed patronage society and at the expense of hardworking taxpayers
the budget should in fact be used to place emphasis on the creation of an environment conducive to job creation - an open opportunity society where success is achieved through good skills development and hard work and where every citizen will have the opportunity to succeed irrespective of race , religion or sex.