Call to ban fat cat business deals

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By Gaye Davis And Michael Mpofu

Cape Town - The cost of financial mismanagement and corruption in the public service has soared from R130 million in 2006/07 to almost R1 billion in 2010/11, the Public Service Commission (PSC) revealed on Wednesday.

This has prompted the commission to call for public servants to be banned from doing business with the state through companies they own. It also says lifestyle audits of key staff should be performed to stop financial misconduct in government departments.

The commission made this submission on Wednesday as it revealed that the amount involved in financial misconduct cases had soared from R130.6 million in 2006/07 to R932.3m in 2010/11.

“We’re moving towards a billion rand,” Dr Richard Levin, the director-general of the Public Service Commission (PSC), told Parliament’s public service and administration oversight committee. Figures for 2011/12 were not yet in.

National and provincial departments are required to report to the commission on finalised financial misconduct cases – irregular, wasteful and fruitless spending and corruption – but the PSC believed there was under-reporting, he said.

There were 1 042 cases reported in 2006/07 and only 1 035 last year, but the money involved had “soared dramatically”.

Levin said there had been a steady increase over the years in the number of senior management staff charged with financial misconduct. However, departments had “consistently failed” to institute criminal charges.

In only one in five cases was criminal action taken, with no charges being laid in 76 percent of cases.

Urging that state employees be prohibited from doing business with government departments, Levin said the commission had scrutinised the financial disclosures of senior management in four national departments. These showed a high percentage of possible conflicts of interest through links between the officials’ jobs and private companies.

Of 157 top officials in the Department of Co-operative Governance and Traditional Affairs, 31 percent had potential conflicts of interest. There was a correlation between private companies and the individual’s official responsibilities in 24 percent of cases and one in five had more than one company.

Levin gave similar figures for the Departments of Transport, Public Works, Human Settlements and Health.

“These numbers are cause for serious concern. We don’t believe it’s tenable. This is why we believe senior management staff, and particularly those involved in supply chain management, should be prohibited from doing business with the government. Some members have five or six companies.”

The owning of private companies by public servants had implications for service delivery and possible corruption.

Levin also called for lifestyle audits of key staff and audits of the indebtedness of employees. He also appealed for an improvement in the handling of cases of employees found guilty of financial misconduct, saying they should lead to criminal charges.

There is no rule against state employees having private companies that tender for government contracts, but they are required to make financial disclosures to avert possible conflicts of interest. Figures provided by Levin show the level of compliance remains poor.

Some provinces – Gauteng, the Western and Northern Cape, Limpopo and Mpumalanga – were achieving this “basic” level of compliance. But 17 national and 14 provincial departments failed to meet the May 31 deadline for financial disclosures.

Serial offenders included the national Departments of Communications, Correctional Services, Military Veterans, and Rural Development and Land Reform, while the North West was the worst-performing province. “It’s a matter of serious concern,” said Levin.

The commission now intended to scrutinise every single financial disclosure form submitted, and to check it not only against the deeds registry and companies’ register, but also the departments’ supplier databases.

The historical exclusion of the black majority from the economy meant there was “great reliance on the state not only for welfare but also for contracts and even patronage”, with corruption involving not only contracts but nepotism.

“One of the consequences of our troubled history is the growth in parasitic forms of accumulation that plague the procurement of goods and services by the state.”

As a result, supply chain management had become “a very strategic and sensitive area” of public administration. Social inequality exacerbated the challenges.

Levin said laws and the code of conduct needed to be strengthened and enforced. “If there are no consequences it creates a breeding ground for corrupt practices.”

The Public Service Commission Act needed to be amended to carry greater legal weight as “there’s too much of a culture of no consequence”. Cases reported to the corruption hotline (0800 701 701) were referred to departments. But they lacked the capacity to investigate or run disciplinary hearings, leading to officials being suspended on full pay for long periods.

Officials would start to take anti-corruption strategies and the code of conduct for public servants seriously only when they started to suffer consequences, Levin said

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