Proposed amendment of PFMA deserves multi-partisan support

22 July 2020
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Democratic Alliance Member of Parliament, Ghaleb Cachalia, who also serves as the party's spokesman on public enterprises and serves on the Ethics Committee in Parliament, introduced the Public Finance Management Amendment Bill to the National Assembly.

The Bill proposes only one amendment to the Public Finance Management Act (PFMA), but this single change might be all that is necessary to lift the veil of secrecy currently hanging over the financial statuses of many State-owned enterprises (SOEs).

Responsibilities for executive authorities

Chapter 7 of the PFMA deals with the executive authorities of government departments and public entities. Executive authorities are those individuals who must answer to Parliament at the end of the day. The buck stops with them; or at least, it is supposed to.

In terms of section 65 of the PFMA, an executive authority is obliged to table the annual reports and financial statements in the National Assembly, as well as the accompanying audit reports on those statements, within one month after the accounting authority received the audit report.

If, however, the executive authority fails to table the requisite documentation within six months after the end of the financial year, they must table a written explanation in the legislature in which they set out the reasons for failing to comply with the law.

Unfortunately, this is all the PFMA provides for in cases where an executive authority fails to discharge their duty.

Cachalia wants to amend section 65(2)(a), the section that obliges the executive authority to table an explanation, with the insertion of the following phrase at the end: ‘and must table such annual report, financial statements and audit report on those statement within 60 days after the tabling of such written explanation.’

This amendment, if adopted, will effectively force an executive authority to follow up their explanation for their failure to table all requisite documentation, with the actual tabling of said documentation.

Transparency and accountability

It is quite astounding that the PFMA does not already provide for executive authorities to be obliged to eventually table the necessary documentation after initial failure to do so, but hopefully political differences within the National Assembly can be put aside for the sake of transparency and accountability. The amendment bill deserves multi-partisan support. Hopefully this is not too much to ask.

After all, section 195 of the Constitution enshrines the basic values and principles that, in theory, should govern public administration, with the principles of transparency and accountability being only two of them.

Section 2 of the PFMA also serves to give effect to the provisions in section 195, by stating unequivocally that the object of the PFMA is to secure transparency and accountability, amongst other things.

Sadly, the executive as whole, but more specifically the Department of Public Enterprises, has done anything but abide by the PFMA and the Constitution, especially when it comes to SOEs such as South African Airways (SAA).

SAA last formally tabled its annual report, financial statements, and audit report in 2017 to the National Assembly. In 2019, the failed airline presented its draft financial results of 2018 and 2019 to the Standing Committee on Public Accounts.

These statements are still not finalised and readily accessible on SAA's own website, but insight into its finances can be gained from the proposed business rescue plan.

For insight into SAA's finances going back to 2001, our SOE Tracker platform can be accessed here.

In conclusion

It is high-time that South Africans insist on giving effect to the principles of transparency and accountability by entrenching them unambiguously in legislation.

If ever there were a time when wasteful expenditure and outright corruption and looting would serve as the final nail in the coffin of the economy, it is now, and we cannot stand by idly and watch that happen.

If government is serious when it says that it wants to root out corruption and curb wasteful expenditure, they should be able to pass this quasi-litmus test with ease. If not, then the writing on the wall simply becomes ever clearer for those that wish to see it.

This article was first published on BusinessBrief on 15 July 2020

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