MR T P MTHETHWA CHIEF EXECUTIVE OFFICER Public Protector SA IMFO CONFERENCE 2 October 2013

1. Public Protectors role – Service delivery failures due to bad practices MR T P MTHETHWA CHIEF EXECUTIVE OFFICER Public Protector SA IMFO CONFERENCE 2 October 2013

2. “The state came into existence for the sake of mere life, but continued for the sake of good life.“ Aristotle

3. Outline of Presentation • Introduction • Qualities of a good government • National perceptions on Local Government “bad practices” • AG Consolidated Local Government audit Overview and root causes -2010/11 • Major reasons for “bad practices” • The impact affecting both public and private sectors • Specific integrity framework and strategy for local government • Challenges • Role of the Public Protector: Strengthening Constitutional Democracy, Constitutional mandate and key mandate areas • Typical violations investigated by PP in respect of Local Government • Case Studies • Ga-Magara local municipality • Nala Municipality • Dipaleseng Municipality • Ehlanzeni District Municipality • Embedding a compliance culture: Top down strategy • Leveraging of existing controls • Talk the Talk, walk the walk • We need awareness, intolerance for bad governance and fearless reporting • Conclusion

4. Introduction • “Even the most benevolent of governments are made up of people with all the propensities for human failings. The rule of law as we understand it consists in the set of conventions and arrangements that ensure that it is not left to the whims of individual rulers to decide on what is good for the populace. The administrative conduct of government and authorities are subject to scrutiny of independent organs. This is an essential element of good governance that we have sought to have built into our new constitutional order. (Nelson Mandela) • An essential part of that constitutional architecture is those state institutions supporting constitutional democracy. Amongst those are the Public Protector, the Human Rights Commission, the Auditor General, the Independent Electoral Commission, the Commission on Gender Equality, the Constitutional Court and others.”

5. Qualities of a good Government • It is a government that is democratically organised within a democratic culture and with efficient administrative organisations, plus the right policies, particularly in the economic sphere. • Governance is the centre of democracy in South Africa, driven by constant transformation and continuity • Transformation of Democracy into the Constitutional promise of a better life for all South Africans, requires governance that is dependent on mechanisms, processes and institutions through which citizens and groups can articulate their interests, exercise their legal rights, meet their obligations, mediate their differences and a develop tolerance to accept the things that we cannot change.

6. National perceptions on Local Government “bad practices” 2009 Good Governance Survey Consolidated Report (Nkangala DM) • nepotism most common form of corruption(73.2%) • Other forms of corruption include tender irregularities • Maladministration and signing of cheques without appropriate controls • mal-administration or misuse of council property • 50% believe that cases of corruption go unreported - lack of faith in the municipalities’ ability and willingness to act on reports of corruption • 44.1% of members cited fear of reprisals as reason for not reporting • 48.4% of the members believe that there are no consequences for those convicted of corruption • Only 37% of the members believe that councillors are committed to improving the quality of life of the residents – 47, 2% believe put party interests before the interests of the community. 53.9% of the members hold the view that councillors abuse their positions for personal gain

7. AG Consolidated Local Government audit Overview -2011/12 • Only 9 local municipalities and 8 municipal entities received clean audit reports. • Audit outcomes regressed in the Eastern Cape, KwaZulu-Natal, Limpopo and Mpumalanga, but improved in the Free State. • 94% per cent of auditees had findings on material non-compliance with laws and regulations. • 94 auditees (30%) (2010-11: 82 [25%]) did not provide sufficient, appropriate audit evidence that awards had been made in accordance with the requirements of SCM legislation • Contracts (with a value of at least R118 million) awarded to employees, councillors or other state officials. as well as uncompetitive or unfair procurement processes and inadequate contract management. • Unauthorised expenditure of R9 788 million was incurred by 181 municipalities (70%) -nearly double than in the previous financial year (R4 937 million), while the number of municipalities increased by 28 (18%). • Irregular expenditure of R9 824 million was incurred by 266 auditees (84%). This amount increased by R2 874 million (41%) • Fruitless and wasteful expenditure of R568 million was incurred by 202 auditees (64%). More than double (R320 million) from the previous year, while the number of auditees increased by 49 (32%). • Unfair or uncompetitive procurement processes were followed at 75 %of the auditees (up from 61%)

8. AG Consolidated Local Government audit outcomes -2011/12: Root causes • Slow response by the political leadership to poor audit findings had a negative impact at 76% of the auditees (83% of municipalities and 49% of municipal entities)- significant increase from the 57% in the previous year. • Vacant key positions and key officials lacking appropriate competencies at 73% (up from 70%) of the auditees (76% of the municipalities and 58% of the municipal entities). • The ineffective use of consultants -. 75% of the auditees that had material misstatements in their submitted financial statements were assisted by consultants at an estimated R378 million • At least 71% of the auditees showed signs of a general lack of consequences for poor performance – perception that such performance and its results are acceptable and tolerated. • 164 municipalities (64%) did not record any allegations of financial misconduct (60%) did not record any allegations of misconduct in their SCM processes. 155 municipalities (60%) did not take the necessary steps to recover or approve and certify unauthorised, irregular as well as fruitless and wasteful expenditure

9. Major reasons for “bad practices” • The Auditor-General’s report has identified a lack of controls, mismanagement and lack of governance principle as the key reasons for the state of despair in municipalities. • Other reasons include- • Override of internal Controls • The improper political and administrative interface • Collusion b/w Employees and 3rd Parties • Poor Internal Controls • Lack of Accountability/ Weak accountability frameworks • Poor physical security • Poor ethical culture and poor values • Poor hiring practice (Filling of vacant positions, nepotism, Cronyism • Weak national and provincial oversight of local government

10. The impact affecting both public and private sectors • Lost revenue from, and high expenditure as a result of corruption regarding tax and custom levies, licensing fees, traffic fines and fronting on state contracts. • Reduction in productive investment and growth. Widespread corruption provides a poor environment that does not attract foreign investment. • Costs to the public and the poor - diversion of resources from their intended purposes • Loss of confidence in public institutions: erodes stability and trust and it damages the ethos of democratic government- a loss in confidence in public institutions - sometimes leading to violent protests • Source: Corruption at the local government level: Time to crack the whip by Nontando Guwa-Ngamlana

11. Specific integrity framework and strategy for local government: • Policy and regulatory framework • Municipal Finance Management Act, 2003 • The Constitution – sections 53, 152, 195 Chapt 3 & 7 • Local Government: Municipal Structures Act, 1998 • Local Government: Municipal Systems Act, 2000 • Local Government: Municipal Demarcation Act, 1998 • Codes of Conduct for Councillors and Municipal Employees • Investment of significant resources • The Special Investigation Unit (SIU), Asset Forfeiture Unit (AFU), Scorpions, Specialised Commercial Crimes Unit, The Anti-corruption Coordinating Committee (ACCC), Auditor-General, Public Protector, New Anti-Corruption Bureau, Well functioning criminal justice system. • Local Govt Anti-corruption strategy • Focus on the Organisation( Effective implementation of Codes of Conduct, systems, policies and procedures, sound internal controls, risk assessment and management, Internal and External Audit) • Focus on Employees (Vetting, Induction Programmes, Obligatory Leave Periods, Exit Procedures, Control Assets) • Focus on other Stakeholders • Enforcement (Reporting and monitoring of allegations of unethical conduct, fraud and corruption, Whistle-blowing) • Implementation (Ongoing maintenance and review, Ensuring a coordinated implementation effort, Raising awareness on good governance

12. Challenges • Non Reporting/ Ineffective implementation of the Protected Disclosures Act • Limited implementation and adherence to the Codes of Conduct • Non-compliance with the Financial Disclosure Framework • Non-compliance with the Minimum Anti- corruption Capacity Requirements • Supply chain management prescripts are not adhered to • Weak enforcement and inconsistent application of disciplinary measures • Resignation and transfer before disciplinary processes finalised Source: Public Sector Integrity Management Framework

13. Role of the Public Protector: Strengthening Constitutional Democracy • The Public Protector represents an evolution of a modern democratic oversight institution -moved away from a “mere complaints department” to an “architect of good governance.” • In terms of its mandate to strengthen constitutional democracy the Public Protector has a reactive and a proactive mandate regarding ensuring that state affairs are conducted with integrity and general good governance. • Investigates on the basis of a specific complaint regarding service failure and conduct failure • Has the power to conduct own initiative investigations • May conduct systemic investigations, resolve PAIA disputes • Investigate and resolve allegations of improper or dishonest acts or omissions or offences ito Prevention and Combating of Corrupt Activities Act

14. The Public Protector is part of the broader National Integrity Framework • The Public Protector South is national Ombudsman like institution , established under section 181 of the Constitution, which forms part of the national integrity framework. • Part of a network of oversight and accountability bodies that include the Auditor-General, Public Service Commission, the Judiciary, Financial Intelligence Centre, Legislature, media and society. • Important role in enforcing Democratic values of good governance, the Rule of Law and quality of life. • Swedish origins (202 years)with national resonance with traditional institutions such as the Venda Makhadzi (see cover page).

15. Constitutional Mandate • Established under chapter 9 of the Constitution, the Public Protector has the power under section 182 of the Constitution to strengthen and support constitutional democracy by: • investigating any conduct in state affairs, or in the public administration in any sphere of government, that is alleged or suspected to be improper or to result in any impropriety or prejudice; • to report on that conduct; and • to take appropriate remedial action. • Mandate covers all organs of state at national, provincial and local levels, including local government and extends to state owned enterprises, statutory bodies and public institutions. Court decisions are excluded. • Section 182(4) enjoins the Public Protector to be accessible to all persons and communities • Nationals and non-nationals may approach. No need for direct prejudice/injustice>

16. Six(6) Key Mandate Areas The Constitution anticipates mandate expansion through legislation, and legislation passed since establishment 15 years ago has resulted in the Public Protector being a multiple mandate agency with the following 6 key mandate areas: • Maladministration and appropriate resolution of dispute the Public Protector Act 23 of 1994(PPA). The maladministration jurisdiction transcends the classical public complaints investigation and includes investigating without a complaint and redressing public wrongs(Core); • Enforcement of Executive ethics under by the Executive Members' Ethics Act of 1998(EMEA) and the Executive Ethics Code (Exclusive): • Anti-corruption as conferred by the Prevention and Combating of Corrupt Activities Act 12 of 2004 (PCCAA) read with the PPA(Shared); • Whistle-blower protection under the Protected Disclosures Act 26 of 2000. (Shared with the Auditor General and to be named others; • Regulation of information under the Promotion of Access to Information Act 2 of 2000;(PAIA) and • Review of decisions of the Home Builders Registration Council under the Housing Protection Measures Act 95 of 1998.

17. OTHER MANDATE AREAS Transversal investigative powers acknowledged in sector specific legislation, including the following: • Promotion of Equality and Prevention of Unfair Discrimination Act 4 of 2000; • National Energy Act 40 of 2004; • Special Investigation Units and Special Tribunals Act 74 of 1996; • National Environmental Management Act 108 of 1999; • Gauteng Petitions Act. Non-investigative functions conferred by legislation such as: • Public Finance Management Act 1 of 1999; • Lotteries Act 57 of 1997; • National archives and Record Service Act 43 of 1996; and • Electoral Commission Act 51 of 1996.

18. Typical violations investigated by PP in respect of Local Government • Over 1000 cases investigated each year with over 180 cases relating to allegations of unethical conduct, financial mismanagement, abuse of power or corruption in Municipalities under PPA, PCCAA and PDA. • Key issues involve corruption, abuse of power and abuse of resources in procurement management, allocation of social housing, licencing and traffic regulation, employment opportunities, including Extended Public Work Programmes(EPWP), theft of electricity and municipal billing malpractices as well as enforcement of by-laws • Systemic issues -alleged maladministration in the delivery of RDP housing, Billing in JHB The South African government has invested over ZAR60bn (7,1bn USD) of public funds into the provision of an estimated 2,8m subsidised housing units for low-income beneficiaries. A large number of the cases reported involve the fraudulent allocation of these subsidised houses

19. KIND OF CASES UNDER INVESTIGATION BY THE PUBLIC PROTECTOR Specific allegations typically involve: • Bribery, • Fraud; c) Abuse of power; • Conflict of interest; • Corruption; • Favouritism • Nepotism Irregularities in relation to tender and procurement related matters: *Auditor General SA Consolidated Local Government audit outcomes -2009/10

20. Case Studies: Ga-Magara local municipality • Public protector made damning findings • against Ga-Magara local municipality , • which has been rocked by a series of • community protests led to schools closing for almost six months, costing learners a year’s education. • Systemic governance failure at the municipality and systemic violations of the law and policies. • PP found many of the community’s grievances were valid - caused by failed leadership on a number of levels • Municipality failed to deliver on roads, housing projects and electricity, and confirmed a catalogue of governance failures against the now late mayor and senior leadership in the municipality. • Findings include R46-million in irregular expenditure over the past two financial years. • This includes R16,000 spent on alcohol for employees and R25,000 on calendars with spelling errors.

21. Case Studies: “Pipes to nowhere”: Nala Municipality • PP found that a R70 million flush toilet system was not connected even though the contractor had been Paid - fruitless, wasteful expenditure, and financial misconduct • a bucket system supposed to work in its place was dysfunctional, leading to sewage being spilled “all over the place”, which was against the right to healthy and safe services; • there were unfinished houses in Maranatha, • the Mabana School had a sewage spillage problem, • a report by KPMG detailing problems in the municipality was not tabled in time • there was “manipulation of supply chain processes” and “abuse of process”; • poor communication between the mayor and municipality culminated in protests; • a sewage plant was incomplete and non-operational because of maladministration; • Most of the findings were violations of the Municipal Finance Management Act and the Constitution.

22. “A GLIMMER OF HOPE”THE INTERVENTION AT DIPALESENG • Poor service delivery and governance by Dipaleseng Municipality in the Mpumalanga Province, approximately 70 kilometers from Johannesburg, were the cause of several public protests in 2009. • It appeared that the lack of service delivery related directly to poor governance and integrity failures. • Issues such as the procurement of goods and services, improper conduct by municipal officials and Councillors, corruption and theft were prominent causes for concern.

23. THE INTERVENTION AT DIPALESENG • The intervention by the Public Protector at the Municipality resulted in several of the complaints, such as a lack of housing and poor workmanship being addressed. • Ongoing concerns: • Most roads in the town are lattice works of potholed tar. • Rubbish removal is inadequate. • There are frequent dips in the electricity supply because the town has inadequate transformer capacity; • Municipal services bills are often not sent, and tariffs seem to be set on an arbitrary basis • The municipal fire service has a staff of three, with three fire trucks — but it does not operate after normal working hours. • Water has often not been available for days at a time. • Karan Beef's the largest abattoir in the southern hemisphere, slaughters more than 2 000 cattle a day. The company has tarred the road to its Factory, installed a generator and set up a water purification plant. But it still draws its water from the municipality and when water is not available it cannot slaughter.

24. Dipaliseng Case study: Things went wrong from the Top down • MEC for Cooperative Governance and Traditional Affairs of the Mpumalanga Provincial Government did not in terms of section 105 of the Municipal Systems Act, assess the support needed by the Municipality • The Municipal Manager, as accounting officer of the Municipality failed his responsibilities in terms of the MFMA, for ensuring the effective collection of revenue for the Municipality through effective credit control and debt collection • Some of the key officials involved in the process had to be charged with financial misconduct. • Officials of the Municipality issued fraudulent credit notes to write off accounts in return for bribes and that accounts were closed after which payments were “taken for personal use.” • Accounting officer is required to take serious action against officials in respect of financial misconduct, including reporting the matter to the SAPS, in appropriate circumstances. Serious charges were brought against the three officials involved. However, the Municipality was satisfied to accept guilty pleas on a lesser alternative charge and to issue written warnings as a sanction.

25. . Dipaliseng case study: Existing controls were ignored • Budget and Treasury Office of the Municipality was deficient • Credit Control Policy of the Municipality was not complied with in respect of the recovering of debts and revenue. • Requirements of the Municipal Systems Act were not met in respect of the preparation and implementation of its Integrated Development Plan • Resource and capacity constraints that hampered complaince, were not addressed • Non compliance with Supply Chain Policies –delays in the conclusion of the sale of land, were not dealt with • The Municipal Manager failed to report his knowledge and/or suspicion of credit note fraud amounting to approximately R 1,5 million by officials of the Municipality • The Municipal Manager failed to report the findings of the Municipal Finance Unit of the Mpumalanga Department of Cooperative Governance and Traditional Affairs

26. Dipaliseng Case study: Culture of non compliance affected every aspect of service delivery Violence in Siyathemba Poor infrastructure houses without a toilet Dangerous pothole on R51

27. Embedding a compliance culture: Top down strategy • In a Top Down Strategy, • Leadership models the behaviours they demand of others • Leadership communicates the importance of integrity when making difficult decisions • Leadership understands the circumstances that drive unethical behaviour • Leadership develops processes to identify and remedy those areas where pressure points occur • Employees feel a sense of responsibility and accountability for their actions and for the actions of others • Employees freely raise issues and concerns without fear of retaliation • The executive management effectively oversees a number of key business processes: • Strategy and operation planning • Risk management • Ethics and compliance • Performance measurement and monitoring • Management evaluation, compensation and succession planning • Communication and reporting • (Governance, Risk and Compliance. Complex Issues, one Clear Solution, 2009 SAI Global Limited)

28. Leveraging existing controls • Municipalities operate in a highly regulated environment, especially on the standards that are expected in terms of financial management, good administration and governance, as well as service delivery. • Starting with the Constitution, Constitutional Legislation such as PAJA, and legislation of general application such as the MFMA, the Municipal Systems and Structures Acts, PPPFA, Treasury Regulations, Supply Chain Polices, Batho Pele Principles, Codes of conduct, and guidelines and directives – establish controls for all aspects of management and performance in terms of Governance, Risk and Compliance. • Yet, there are high levels of non-compliance • Leveraging more than just awareness and knowledge of controls.

29. Talk the talk, walk the walk • Many of the problems investigated by the PP in respect of Municipalities started with Councillors, leaders, and in people in position of power in the Municipality who did not own up to the commitments and responsibilities entrusted upon as public servants • Many organisations have set expectations for ethical conduct and are working towards maintaining a strong ‘tone from the top’. • Many of these same organisations really don’t know whether their employees and managers will demonstrate integrity in their actions when they are under pressure, experience challenges and immediate strategic objectives loom large in front of them. • One of the major reasons why institutions fail to build a strong ethical culture is because leaders do not take the first responsibility to personally set the example for integrity and compliance. • Not enough to provide employees with policy guide or “code of conduct.” Employees to receive training on all aspects of integrity & compliance to reinforce employee awareness, knowledge and commitment • Leaders must communicate. Communication should focus on raising awareness of compliance and creating a robust integrity culture. • (Lazarus Angbazo GE President & CEO for East, West & Central Africa)

30. We need awareness, intolerance for bad governance and fearless reporting • PP recent said we need to “inculcate a culture of revulsion at acts of corruption and bad governance. All such acts should be accompanied by opprobrium and a sense of duty to bring such acts to light where known. “ • Whistle-blowing without fear of reprisals is a very important factor. Currently we are also battling as a society to encourage whistle blowing and to assure potential whistle blowers that they will not be victimised. • Without the active participation of society, the fight will not be effective.

31. CONCLUSION • The concept of integrity systems also supports the very important notion that there is no single institution or oversight body that would be able to take the responsibility to instil the principles of integrity in public administration • In order to deal with the challenges effectively, we need the public and private sectors to a shared responsibility of a cohesive approach to the building of integrity for a Responsive, Accountable, Effective and Efficient Local Government System • Regardless of the above, your initiative gives me and many South Africans hope that we will turn the corner and deliver the service that our Constitution promises the people. This gathering indicates that there are leaders in this important sphere of government who are committed to democracy by ensuring meaningful service delivery and good governance, and rooting out corruption

32. THANK YOU www. pprotect.org