Prohibition on public servants doing business with State; Financial Disclosures; National School of Government funding model; with Minister & Deputy

Meeting report

National School of Government (NSG) on its proposed Revised Funding Model
Prof Richard Levin, Principal: National School of Government, said the purpose of the presentation was to provide a background to the current funding and business model of NSG; to reflect on the challenges that NSG was facing with its current funding model and to propose and seek the support of the Committee for a revised funding model. He noted that the Minister of Finance established and opened the Training Trading Account (TTA) in April 2001 in terms if Treasury Regulation 19 for the purpose of the revenue generation. At the time, NSG was required to recover all costs associated with the training. This included costs associated with developing materials, marketing, logistics, and infrastructure of the school. He provided a table of a five year indication of the NGS funding from the National Treasury (Vote), revenue generated (Trade) as well as the number of public servants trained. He noted the TTA accumulated reserves of R91.2 million, which were used to off-set against the budget cut imposed by National Treasury in the 2016/17 budget. The funding allocation was significantly reduced in 2016/17 and thus insufficient to cover overheads.

Prof Levin said that many departments did not honour the prescribed 30-day payment of invoices for services rendered. This had implications for increasing NSG’s debts, to a point where there was a potential bad debt of R17.5 million to write off in the current year. In response NSG introduced a pre-payment method when booking for training.

Prof Levin, referring to the course tariff structure, noted that, the then named PALAMA submitted a tariff structure to National Treasury that was provisionally approved. The structure was based on the model of being a facilitator of training not a provider of training.

Prof Levin noted that, after analysing the funding models of other foreign countries (including Liberia, Uganda, Rwanda and Canada), schools for government rely on a fee-for-service model to fund training activities, or a fee-for-service and cost-recovery models. In some countries, training activities do not entail a service fee. He noted that the revised funding model would be based on a value proposition, comprising the following three components funding model: Treasury Transfer (49% of total budget), Top Slicing from national departments (31% of total budget) and Own Revenue through Cost Recovery (20% of total budget). The total budget for 2017/18 and 2018/19 fiscal years stood at 328.9 million and R352.3 million respectively. In implementing the revised funding model, Treasury would play a crucial role as per legal instruments regulating the top slicing of the training budgets. Together with DPSA, Department of Planning, Monitoring and Evaluation (DPME) and Treasury, NGS would identify and agree on a list of compulsory courses for national departments – which only NSG would be offering. Accordingly, NSG ought to be recognised as the preferred service provider for public service training.

Prof Levin concluded by asking the Committee to support the tabling of the revised funding model before Cabinet for approval, once other consultative processes have been concluded.

Discussion
Ms D van der Walt (DA) welcomed the presentation and said that the discussion between the four departments should happen. There was a feeling or perception that NSG had no formal or legal structures and asked whether the school structure had been approved. If not, why not or when would it be approved?

Mr S Motau (DA) commented that before discussing the school’s revised model, he noted the school had a debt of R17 million. Can they explain how this happened? It would not make sense to discuss a funding model if the Committee did not know how the debt accrued and how its books could be kept clean. The debt could imply that the school did not have capacity to pay creditors and this needed clarification.

Ms M Matshoba (ANC) asked if NSG was making any positive impact on institutions through training. She asked for clarity on the different funding models which had been identified. Treasury had not provided additional funding and he asked what the specific reasons provided by Treasury were. Was the denial of additional funds motivated by the fact that NSG was not making impact?

Mr M Ntombela (ANC) appreciated the report and noted the NSG concept had ministerial support as Prof Levin had indicated. Still, there were these problems ensuing and thus he did not understand where the problem lay exactly. Was it a lack of administrative will to implement or was it a lack of political will? The NGS had support that it deserved. What was actually the problem? The revised funding model was a mixed model, implying that there was an intention to recover but the intention appeared to be partial. Why not total recovery given the challenges the departments were facing in the public service sector? NGS indicated that there were still services provided free of charge and he did not understand the rationale for that.

Ms R Lesoma (ANC) said her input was in the form of recommendations. It appeared that the revision of the funding model was not within the power of NSG and DPSA. She therefore suggested that a roadmap should be developed so that when the Committee monitors it would be able to determine the progress of NSG on the basis of indicators. NSG should not only submit the costs but should also submit strategies to mitigate the challenges faced.

The Chairperson remarked that NSG was working in a competitive market and asked what the NGS’s competitive urge was apart from being a school of government. What would make public servants feel they were missing out if they did not attend training with NSG? Referring to the R2.7 billion, she asked what would be NSG’s contribution. She commented that there should be a workable learning methodology that combined both theory and practice. Students should be taken to the field to learn how things are done in practice. In a competitive market, everybody had to identify a niche. What was the niche of the school?

On the school structure, she asked whether it was approved. The school ought to be competitive. Did NSG consider integrating some of its programmes with some universities or was it saying that public servants should attend it simply because it was the only school of government. Another issue that was not sitting well with her was to see those graduates with university degrees could just write a good thesis but were without practical skills. If graduates lacked practical skills, what should be a university’s inputs? She was not implying that the school had the capacity of providing everything but there were core aspects that graduates should be equipped with. She was very happy with the work of, and existence of the school, but she wished to see it prospering and contributing more to the development of the public service. Were NSG programmes aligned to the provincial school? Was there anything exceptional to motivate students to join NSG. She insisted that there should be something to motivate students to attend a particular school. Treasury could not engage in prioritising programmes of institutions. Treasury’s role was to keep and balance the books of government and to fund programmes but not to state which programme of the entity should be prioritised or just cut a budget without consultation or stating why.

Prof Levin responded that he wanted to connect dots on the question raised. In comparing NSG with other universities, a critical issue was the value proposition because the value lay on the ‘working’ line. It was very easy to get a professor from any university – Pretoria, Johannesburg, Limpopo to come and teach students how the PFMA applied or what it said. The salient question was how you take a law and turn it into a workable implementation? How do you deal with delays and blockages in service delivery? These were the skills that needed to be developed and that was NSG’s competitive edge. NSG had very competitive people in senior management, who engaged with the Departments and Treasury. They had to implement legislation and regulations. Legislation talked about 30 day payment. There were a lot of blockages to meet the requirement of 30 days. These were underlying questions that a professor from any university could not find answers to. Many people had master degrees but the problem was how to apply the knowledge one has acquired. In this country, there was a need to build institutions. In Botswana, Uganda, Kenya, and Canada there were people at senior managerial level who served in different departments. Prof Levin noted that he was a DG himself and had moved from department to department, each with a clear vision, but which none had ever realised. He noted that he did not agree with everything written under Chapter 13. He had any way to read it carefully because some aspects were relevant. There was a need to go institutional.

Prof Levin replied that there was an approved formula for the NSG structure under which it was working. NSG had been achieving clean audits for many years. The corporate governance may not be a problem but the formula that was applied. The structure ought to be fixed, because there were some challenges. Important to note was the urgency to make this institution work.

On performance, Prof Levin noted that NSG was challenged by meeting targets. The NGS was at the stage where it had started meeting performance targets. Fixing performance was the main focus. Some might ask themselves how a clean audit was achieved without a good performance. A clean audit could be achieved even if an institution was not performing well.

On its impact, Prof Levin responded that an impact could be illustrated by indicators, such as tracking those graduates who go back to their employment. An impact assessment study was however needed. A study of this nature was the only way an impact could be determined.

On the side of Treasury, Prof Levin said that it was fair to note that NSG had received additional funding to make the model work. It was inadequate but, at least, it helped.

On the question of administrative will, Prof Levin stated that there were both administrative and ministerial will to support the institution and it enjoyed the support of Treasury. Even those in the political positions supported the institution and were asking why NSG was not embarking on something which was more ambitious. The problem was that Treasury looked at everything in ratios. The mixed model that NSG wanted to use would allow it to run its business. NSG had a programme of calling on all retired staff – including retired parliamentarians to come and teach students in accordance with their experience. The programme that the NGS had developed around women in leadership was excellent. The methodology the NGS was using was also excellent as it dealt with social inequality. It involved interactions, participation and empowerment. NGS was therefore moving in the direct direction. On the whole issue of impact, he suggested that the Committee come and see what NGS was doing. The work of NGS had an impact on the performance of institutions. And this was a very positive sign.

The Chairperson said that there should be an engagement with the DPME. The budget was cut at 12% and this negatively affected the workforce that had to be decreased. A solution around cutting the budget should be sought. However, the Committee was not supporting the question of waking up to say that R70 million was needed. Treasury ought to consider whether such a demand was reasonable. The NGS was needed if one took into account that South Africa was a developmental state. Several years in a democracy passed when the nation’s focus was on developing democratic policies and institutions. It was a time to focus on public servants to ensure that they were equipped with skills that would enable institutions to achieve the developmental goal. The Committee would like to see that NSG was developed and empowered to provide the required skills. The critical problem that South Africa was facing was the feeling of exceptionalism where South Africans saw themselves as better or developed and thus forgot to build bridges with other African nations. South Africa was not looking at the public service of other countries and learning from them. There was a radical need to start the programme of decolonising the continent through the concept of dismantling boundaries. A note should be taken that NSG was supported by the Committee.

Ms Lesoma commented that the Chairperson could not impose on the Committee her personal view, when she stated that the Committee supported the NGS.

Ms Dipuo Letsatsi-Duba, Deputy Minister of Public Service and Administration, appreciated the stance the Committee was taking. The funding model should be strengthened by looking at the Sector Education and Training Authority (SETA). There was a lot of money sitting with SETA. The NGS was an institution that could produce high quality public servants. The question was how the school could be positioned to produce these public servants that the country wanted. The Committee should not restrict its work to carrying out oversight; rather extend its work to include working hand in hand with DPSA to develop the school.

The Chairperson remarked that all were passionate about helping the school. However, the problem was the funding model, coupled with the fact that the new ministerial team had inherited serious challenges in the public service that needed to be addressed.

Ms Faith Muthambi, Minister of Public Service and Administration, remarked that the new structure of NSG was to be approved and would be sent to the Committee. She also noted the Chairperson’s suggestion that NSG should adopt a competitive policy and illustrate its competitive edge.

Prohibition on public servants doing business with the State
Mr Itumeleng Mongale, Chief Director: Ethics and Integrity Management, DPSA, noted that the 2016 Public Service Regulations prohibited employees from conducting business with an organ of state and conferred the power to the Minister of Public Service to determine the form and process for application for other remunerative work. In November 2016, the Directive on Other Remunerative Work was issued which also prevented employees from using approved remunerative work to undertake business with an organ of state.

Mr Mongale noted that a new function on PERSAL was created to capture new applications for remunerative work in line with the Directive and that different categories of remunerative work were created on the PERSAL system, implemented with effect from October 2016. Both DPSA and Treasury monitored all registrations on the Central Supplier Database and screened it against PERSAL information and any employee detected was flagged. Those flagged had to provide proof that they were not employees, before the registration was allowed. 979 applications were therefore captured. 550 applications were approved whereas only 39 were deemed approved.

On doing business with the state, Mr Mongale noted that, in January 2017, the Directive on Conducting Business with an Organ of State was issued. The Directives excluded certain activities that should not be considered as doing business with organ of the state, for example, lecturing and examination marking. In collaboration with Treasury, DPSA identified employees currently registered on the central Supplier Database and those who were conducting business with an organ of state.

Mr Mongale provided the status of employees doing business with the state as at February 2017. 11 516 businesses were registered on the Central Supplier Database and 893 contracts were in place involving public service employees conducting business with an organ of state. 2 536 employees, who were registered, resigned from the public service by the end of February 2017. In January 2017 the Minister informed executive authorities of all those employees captured and in February 2017, informed Heads of Departments to report on employees who had either terminated their employment in the public service or who continued to do business with the state. DPSA was consolidating a report on the feedback received from the departments.

Discussion
Ms Ntombela welcomed the presentation and said he did not understand the rationale behind the six months window period. Why not 12 months? There were times when you get special advisors to government who intend to do the same business with government and what happened in such circumstances? He noted that 7% were consultancy work that included universities. Were you making use of NSG? What was inhibiting you from using the services of NSG?

Mr Motau commented on the flagged employees, saying that those employees who do business with the state had become so smart that they could not be caught. Do you have a new strategy to be used to detect them? Every criminal is smarter than the person who wants to catch him. When the presentation referred to consultancy, what type of consultancy was it referring to?

Ms van der Walt remarked that the topic of doing business with the state was, if the Deputy Minister recalls, initiated by her to be debated in Limpopo. This involves both staff and politicians doing business with government. The Treasury report revealed that 12 000 people were registered to do business. To make it worse, another 14 000 were listed as directors of companies. Why could these people not be blacklisted? She was concerned that it has become a trend to do business with government as it looked like that there was nothing wrong with doing such business. People employed by the state should not do business with it whilst there are people struggling to get into the economy to improve their life. It looked like public servants were trying to keep all opportunities for themselves – sometimes registering companies under the names of their wives and children. Principals were using their own companies to supply food to their schools. If this is the case, how would children studying at universities have access to these opportunities? It was obvious that there was no political will and seriousness to stop this now. Why were these people not being caught?

Ms Matshoba remarked that it was publicly known that public servants at a low level were poorly paid and, for that reason, should go out there to make extra income. Senior managers were not allowed to do business but they do try to all sorts of tricks to be able to get in on the business. You will find departments which are not interested in complying with the 2016 Public Service Regulations had many employees doing business with organs of state.

Ms Lesoma raised three points: (i) How reliable is PERSAL and how accurate was its information? (ii) Was DPSA targeting senior management? (iii) Regarding new entrants – why in their job description is it not written – they shall not – because it had been a norm to beat the system?

The Chairperson noted that as politicians, they needed to be exemplary. Politicians or senior managers could not be hard on others when they should be hard on themselves. Having said that, the figures shown here might not be accurate because she knew many schools whose principals were involved in the school feeding schemes. Outsourcing was a factor contributing to doing business with the state. Why do departments have to outsource? Outsourcing was compromising the standards and norms. For example, principals would enter into contracts with their companies to supply non-quality food that sometimes ends up poisoning learners. Given the history of the country characterised by the struggle to become an entrepreneur, all activities could not be criminalised. The country had a lot of people who were struggling to make a living and, she was not sure how the legislation was going to be effective.

The Chairperson said that, for effectiveness, DPSA should start its work by doing lifestyle assessments of people. Implementing disciplinary measures was also problematic. If an individual’s job could be terminated due to doing business with the state, such an individual could appeal to the Minister to be reinstated. Another problem was a debate which focussed on criminalisation and penalisation but nothing was being debated on how those who were complying could be given motivational incentives. Referring to the apartheid era, she noted that people fell in love with working for government because of the benefits they were receiving. These benefits were no longer there. Public servants were pushed into doing business with the state because, for example, they were struggling to get housing loans from banks. They should get bonds as a part of a government benefit. The Department should not sit and think about punitive measures, they should also think about encouraging public servants though a clear implementation plan. Housing subsidies were appealing to public servants until it started to be taxed. The Minister should indicate lessons learnt from a criminalisation system that lacked a motivational plan.

Mr Mongale responded that the six months window period was reasonable. The period was given to people who were working with government and whose contracts were on the verge of completion to state whether they would continue to do business with government or not.

Ms Faith Muthambi, Minister of Public Service and Administration, responded that there are two directives: One looked at conducting business outside government and other one within government. She would be sending copies of these directives to the Committee. The question was the capacity of monitoring the implementation of these directives. She would have a meeting to consider these issues raised about implementation of and compliance with the directives because it was important to know the progress of these directives. A disciplinary panel would be established to ensure that punitive measures were taken and imposed. Even a cleaner should make a declaration of assets if involved with state procurement. The policy started to be implemented in January 2017. The Department should have capacity to monitor the Directives and the monitoring would contribute to the fight against corruption.

The Chairperson said that there was a need for clear implementation of the policies and it was noted that the Minister had provided an assurance to the Committee that she would do a clean-up.

Ms Lesoma said that it was important that they declare their assets in order to be able to monitor companies.

Ms van der Walt asked what could happen if the company was blacklisted, after a monitoring and evaluation was conducted.

Minister Muthambi responded that DPSA would work together with Treasury to ensure that the companies that were blacklisted do not move to other provinces to work there. When a company was blacklisted in Limpopo, it could move to Kwazulu Natal to do business there.

Financial Disclosure Framework 2016/17: briefing by Public Service Commission
Ms Sellinah Nkosi, Public Service Commissioner, took the Committee through presentation which focused on compliance with the requirement to submit financial disclosure forms, scrutiny of the financial disclosure form by PSC, and actions taken by the executive when PSC identified cases of conflict of interest. As part of promoting a high standard of professional ethics in the public service, PSC managed the financial disclosure framework (FDF). She provided the status of compliance with the requirement to submit financial disclosure forms by 31 May 2016. Total forms submitted at national level was 10 001 forms out of 10 237 forms that were required. Only five provinces achieved the required 100% submission rate by the due date. They included Free State, Kwazulu Natal, Limpopo, Northern Cape and Western Cape). Thirteen national departments did not achieve the required submission rate.

Commissioner Nkosi noted that during the scrutiny process, PSC established that some of the SMS members did not comply with requirements to disclose all their registrable interests. Failure to disclose all financial interests was regarded as misconduct. A total of 827 SMS members failed to disclose their involvement in companies during the 2015/2016 fiscal year. 19 were at the level of Director-General and Head of Departments and 52 were Deputy Directors General. On top of this, full disclosure of property ownership was lacking in respect of 297 SMS members of both national and provincial departments.

Commissioner Nkosi noted that the Code of Conduct for the Public Service prohibited public servants from receiving and accepting any gifts from any person in the course and scope of their employment, other than from a family member, to the cumulative value of R350 000 per year, unless approval had been obtained from the relevant executive authrority (EA). However, some SMS members had been receiving gifts, the value of which far exceeded the threshold set by the Code of Conduct. For instance, a total of 493 SMS members received gifts to the combined value of R6 339 431.07. At national level, they received gifts to the total value of R4 930 383.56 and at provincial level, to the total value of R1 409 047.51. At the time of briefing, PCS had received feedback from six EAs of national departments about actions taken emanating from the findings made when scrutinising the financial disclose forms.

Commissioner Nkosi recommended that the EAs ought to assess the extent of receipts of gifts and whether the acceptance of gifts had been in accordance with the Public Service Regulations of 2016. Where the regulatory provisions had been contravened, the necessary disciplinary action ought to be taken.

Discussion
Ms Lesoma welcomed presentation and noted that the discussion could not be separated from earlier ones. She asked the Minister to assist in ensuring that the audit is conducted and that all related matters were attended to. She also welcomed the compliance from the provinces.

Ms van der Walt noted that there were similarities of concerns in all the presentations. She asked how it was possible for SMS members not to submit their forms or fail to comply with the framework as this clashed with norms and principles. On the question of non-disclosure of property, she remarked how could it be explained that municipal managers were excluded from those who were required to disclose. She asked why one could find those big houses next to the ocean were owned by traffic officers. Were also traffic officers among those required to disclose? She was also keen to know why 17% of all SMS members were involved in activities that could be construed as posing as a potential conflict of interest. She sought clarity on the value of gifts and remarked that the presentation could have given figures on how many members received gifts and the value of such gifts. Was there no penalties imposed if SMS members delayed in submitting their forms?

Ms W Newhoudt-Druchen (ANC) asked what types of gifts were accepted and the value and asked why the Executive Authority did not chase those SMS members who do not submit or made late submissions.

Mr Ntombela remarked that the Commission should focus on non-complaint SMS members.

Ms Lesoma agreed and remarked that the list should be compiled annually.

The Chairperson asked whether a SMS member could receive a gift that costs R250 000 or whether anything of the same value could be called a gift at all? Was it because she was poor to feel that a gift of such value was impossible? Was it the whole furniture of a house that could cost that amount?

Commissioner Nkosi responded that the figures provided were the total value of gifts either at provincial and national level. There was however a public servant who received a gift from Saudi Arabia costing R130 000. Most gifts from abroad have high value if converted into the local currency. Furthermore, paintings or arts could have a higher value.

The Chairperson said that something tells her that public servants were starting to beat the system. How should conflict of interest be defined? It was very interesting to know that management were disclosing that they had received gifts. She raised her concern that these gifts were not merely given. They were given because of services they were looking for or because of the position of an SMS member. If a person was not in that particular position, he or she would not receive a gift. The value of gifts appeared to be high and this should bring the Commission to investigate why a gift was given and should not just focus on disclosure. A gift was related to a SMS position.

Commissioner Nkosi responded that the Commission had a concept document which required it to conduct lifestyle audits. The Commission faced huge challenges which were identified in the findings. One might live in a nine million house and, after disclosure, the Commission may find that the person had various companies or was a director in various companies. The Commission had so far requested the Office of the State Legal Advisor to advise whether a policy around a lifestyle audit could be implemented. The concept document could be forwarded to the Committee for perusal, but it was not implemented because of issue of the rights of an individual.

Ms Lesoma remarked that the legality of the concept document should be sought.

The Chairperson remarked that the implementation of the concept document would be difficult because it would be inimical to the notion of confidentiality. However, legal advisors should advise the Committee and the Commission on how the concept document could be implemented.

Commissioner Nkosi noted that there was a challenge in dealing with the prohibition of gifts due to certain cultures. Some cultures stated that it was disrespectful to reject a gift. These cultures were being relied on in order to receive gifts. Besides, gifts were supposed not to be expensive. For those who were not complying with the framework, they should be penalised. The punitive measure taken was the naming and shaming of them. The Commission was not primarily focusing on the prohibition but on the declaration of gifts.

The Chairperson disagreed. She remarked that there should be a threshold of what constitutes a gift. How could one explain that something of more than R100 000 was a gift?

Commissioner Nkosi responded that the threshold was set at R350 000 per annum. The Code of Conduct required people to declare gifts they received.

Ms van der Walt remarked that the gifts were related to work that a person did, when a person received a gift of R100 000, there should be an investigation into why the gift was given. The question was why a SMS member received the gift; not why a person did not declare the gift.

Minister Muthambi remarked that she was concerned that even Executive Authorities were not complying with the declaration principle.

The Chairperson thanked the Minister and the Deputy Minister as well as presenters.

The meeting was adjourned.