Contibutors:
Cllr Bheke Stofile Julius
Zolani Zonyane
Kemi Mathatho
William Gumede
Dr Jana Kritzinger
Suren Maharaj
Iris Mosima Maekela
Mookgo Mareletse
Siyasanga Nondlazi
Maletsatsi Marake
Boitumelo Lekoko
Sinazo Mondo
Rakshika Danilala
Vuyokazi Mofokeng
Anna-Maria van Niekerk
Thabang G
Richard
Patrick
Cobus
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Cybercrime has become a significant issue in South Africa, particularly highlighted by the recent incident where cybercriminals looted R300 million from the Department of Public Works and Infrastructure (DPWI) over ten years, as confirmed by Minister Dean Macpherson.
In the most recent incident in May 2024, cyberattackers stole an additional R24 million. This prompted a comprehensive forensic investigation by the Hawks, the South African Police Services (SAPS), the State Security Agency (SSA) and experts in the ICT and cybersecurity industries.
The South African fraud landscape has seen a steady increase over the past five years, making it one of the top risks South Africans face daily. This increase is alarming and indicative of how South Africans are becoming easy targets for fraudsters and scammers who are highly motivated to find their next victim, says Manie van Schalkwyk, CEO of the Southern African Fraud Prevention Service (SAFPS).
The Southern African Institute of Government Auditors (SAIGA), as a professional body, upholds ethical behaviour and standards. At our upcoming annual conference in September, we aim to address these issues in a panel discussion on cybercrime.
In our last SAIGA Audit and Finance Indaba, cybercrime was a topic of great interest. Discussions highlighted the importance of staying ahead of cyber threats and implementing robust security strategies.
Cybersecurity, as described by Amoroso (2006), involves reducing the risk of malicious attacks on software, computers, and networks. This includes tools used to detect break-ins, stop viruses, block malicious access, enforce authentication and enable encrypted communications.
Not only is it important to be cautioned about cybercrime and informed about cybersecurity. It is also essential to protect yourself from cyber-attacks by following measures to prevent it from happening and educating yourself about it.
It only takes that careless link on your emails or phones that looks legit or a pop-up notification
on your phone or pc and just by clicking, phishing has commenced.
Phishing is a type of cyberattack that uses fraudulent emails, text messages, phone calls or websites to trick people into sharing sensitive data, downloading malware or otherwise exposing themselves to cybercrime.
Phishing is one of the most common forms of fraud. An individual receives an email, seemingly from a genuine source (such as your bank or telecoms provider) Kevin Hogan advises on ways to prevent phishing and measures to stay safe online:
• Make sure you bookmark the websites of the service providers that you use regularly, such as your bank or medical scheme.
• Avoid using the same passwords on multiple accounts, and don’t use weak passwords.
• Avoid links on social media or websites with investments that seem too good to be true.
• Act swiftly if your smartphone or card is stolen or lost.
By discussing cybercrime and emphasising cybersecurity measures, SAIGA aims to equip members and stakeholders with the knowledge and tools necessary to combat these growing threats effectively.
Be sure not to miss the 4th Annual SAIGA Conference, which will feature among others, an in-depth panel discussion on cybercrime and cybersecurity, continuing our commitment to addressing these critical issues in our daily lives and more especially in the auditing and financerelated sectors.
Russel Morena SAIGA CEO
Amid pomp and ceremony, President Cyril Ramaphosa convened a joint sitting of the newly established two Houses of Parliament to deliver the opening of parliament address for the Seventh Administration on Mandela Day.
The address began a journey for the Government of National Unity, the second in South Africa’s relatively young history.
But now it is time for elected representatives to roll up their sleeves and get down to the business of delivering on the promises they have made to their constituencies.
The first GNU was formed in 1994 to promote nation-building and inclusivity from a racially divided past during a period of political transition. However, a lot has changed since South Africa became a democratic country, and the present GNU is now up against a new challenge.
Its success will be measured by the willingness of elected representatives to focus on how they work together to govern rather than on who leads them.
As Ramaphosa says, the GNU statement of intent provides a solid base for genuine cooperation between parties across the political spectrum who have signed up of their own accord.
The Statement of Intent commits the signatories to a set of foundational principles that include respect for constitutionalism; accountability, transparency and community participation in government; evidence-based policy and decisionmaking; professionalisation of the public service; integrity and good governance.
In this edition, you can read more about how effective oversight from Parliament is critical in ensuring good governance, accountability and ensuring the performance of the public sector.
SALGA President Cllr Bheke Stofile writes about how dysfunctional municipalities can berevitalised.
But, as you will learn from the National Health Insurance article, it may not be all smooth sailing for the GNU. With much opposition to the NHI
within the government, the implementation of the scheme is likely to get even trickier than it already is, as outlined in one of the articles tackling health matters.
You might want to read about and find out what audit firm employees think of audit quality and the myth about internal audit.
The audit of performance information is an essential part of public sector accountability and governance. I would like you to please read about how this type of audit gained prominence in South Africa due to its crucial role in ensuring efficiency, effectiveness and transparency in public service delivery.
Qualifications fraud has become a major problem in South Africa in recent times. According to media reports, there is a growing number of high-profile people with falsified qualifications who hold positions in the public and private sectors. Learn more about this scourge and the corresponding preventive measures in the qualification fraud article.
Ever wondered about the myths in internal auditing? You can hear from a doyen of auditing, Richard Chambers, what some of the response he still receives after almost 50 years in the profession.
The bumper edition also sees the “Students Corner” introduction as we give our accounting and auditing students a platform to share their views. UCT leads the way with incisive views on ethics in auditing, a student’s perspective in the current climate.
Happy reading!
Kgomotso Sethusha Editor
STEP 1
Eligibility Criteria
NQF 8 qualification in Accounting, Auditing or equivalent
Minimum five years’ experience in external audit or public financial management OR
Completed and signed off articles with a focus in the public sector SAIGA member or in the process of applying
STEP 2
Application Documents
Submit detailed CV and contactable references
Complete RPL Application Form
Submit RPL Evaluation template
STEP 3
Submission Process
Submit Online Application
Submit all attachments to admin@saiga.org.za
www.saiga.co.za
Cllr Bheke Stofile President of the South African Local Government Association (SALGA)
Dysfunctional municipalities have an adverse impact on the quality of life for ordinary citizens, local economic growth and financial management.
The South African Auditor General’s annual reports under the Municipal Finance Management Act (MFMA) provide a national audit of municipal performance. Many municipalities receive disclaimed audits opinions mainly due to the lack of transparency, accountability and poor performance.
However, the South African Local Government Association (SALGA) is determined to change the status quo, as it actively works to revitalise dysfunctional municipalities, focusing on improving service delivery.
The recent elections saw the democratic will of the people expressed through the ballot. The results have led to the Government of National Unity, demonstrating SALGA’s commitment to collaboration and collective progress. This unity is essential as the local government association tackles challenges facing our municipalities.
In its 2021 State of Local Government report, the Department of Cooperative Governance identified 66 of 257 municipalities as dysfunctional. The criterion for dysfunction includes:
• Sustainability issues
• Financial distress
• Governance challenges
• Service delivery challenges
• Section 139 interventions underway
• Litigation and protests
• Additional challenges identified by provincial governments
These contributors to dysfunction must be viewed holistically, considering both structural and systematic challenges. >
“Recognisingthe
pivotalroleoflocal governmentin developmentis paramountforour nation’sprogress. Therefore,theagenda of the 7th Parliament shouldplaceparticular emphasisonthevital roleofcooperative governanceasthe cornerstone of our governmentstructure.”
- Cllr Bheke Stofile
Local Government was founded on the assumption that it would generate 90% of its income from services provided to consumers, with 10% coming from the national fiscus. This assumption has proven to be problematic, given the country's economic conditions. Since 1998, the economy has grown at less than 1% annually, with significant declines during the 2008 global crisis and the 2020 COVID-19 pandemic.
Despite these challenges, municipalities have made significant progress in providing basic services. Access to electricity increased from 46% in 1996 to 94.7% in 2022, while water provision improved from 65% to 82% over the same period. However, the criteria for dysfunction often overlook the structural challenges of Local Government, focusing instead on systematic issues.
Regarding financial sustainability and service delivery, local government is underfunded, with SALGA’s Review Local Government Fiscal Framework Study recommending an increase in
allocations from 9.9% to between 13.5% and 18.8%. Smaller or rural municipalities that often lack sufficient revenue-raising capacity are particularly grant-dependent.
Service delivery challenges, such as infrastructure backlogs and inadequate repairs and maintenance, are often blamed on a lack of skills and mismanagement.
However, the study revealed that Local Government needs an additional R98 billion (capital and operational investment) to meet service delivery demands. Factors such as the Construction Mafia – the extortion groups that typically extract protection fees from local construction companies – and community protests also impact the rollout of projects and spending of conditional grants.
SALGA is actively assisting dysfunctional municipalities through various initiatives namely:
• Review of the Fiscal Framework and Improved Fiscal Allocation
• Advocacy for affordable bulk tariffs (water and electricity)
• Mobilising donor funding (local and international)
• Reviewing conditional grants
• Councillor induction, oversight, SCM Executive Development
• Governance training for council committees, audit committees, and internal audit units
• Customer education and revenue collection campaigns
• Digital maturity assessment and rollout of tools
• Collaborating with provincial and national governments and stakeholders
• Establishing best practices platforms and twinning agreements
• Monitoring and evaluating training frameworks
• Strengthening performance management systems
• Engaging with communities to integrate their needs and concerns
• Legal support
• Water and Sanitation Services support programs
• Electricity distribution industry reform
• Revenue and indigent management
• Just Transition Energy solutions and awareness
SALGA aims to achieve MultiDisciplinary Services by:
• Collaborating with provincial, and national governments and stakeholders such as SAIGA and others to access resources and expertise.
• Establishing best practices platform and twinning agreement, allowing dysfunctional municipalities to learn from those that are doing great.
• Monitoring and evaluating comprehensive training framework for municipal officials and Councillors to ensure value is achieved.
• Strengthening performance management systems in municipalities, tracking progress and identifying areas for improvement.
• Engaging with communities, ensuring their needs and concerns are integrated into our plans.
Councillors play a crucial role in ensuring effective municipal management through oversight responsibilities, such as monitoring budget allocation and expenditure, ensuring service delivery and holding officials accountable. The Municipal Public Accounts Committee (MPAC) adds a layer of scrutiny, examining municipal finances, identifying irregularities and recommending corrective actions.
SALGA emphasises the importance of consequence management in local government, advocating for decisive actions against non-performing officials and those who violate the law. This includes ensuring accountability, implementing disciplinary measures and promoting transparency.
SALGA remains committed to turning around dysfunctional municipalities from both structural and systematic perspectives, making them efficient and sustainable.
South Africans can work together to create a future where all citizens have access to quality services, opportunities, and a higher quality of life.
The Municipal Revenue Management (MRM) is widely misunderstood by the general public, including certain municipal officials and public representatives, with both paying and non-paying citizens who use municipal services sharing the same misconception.
However, the Revenue Management Value Chain demystifies the misconception that revenue management is solely the domain of the Finance Business Unit and that other departments or business units do not actively and meaningfully contribute to revenue generation, the heartbeat of a municipality, or revenue protection and collection.
In any system, if one component is dysfunctional then the entire system becomes dysfunctional. It is no different with the Revenue Management as key business units or departments do not support processes that create an environment for municipalities to collect enough revenue to sustain their primary operation, which is to provide its residents with essential services.
The MRM is often limited to billing, receipting and debt collection, credit control, indigent management, issuing of clearances, processing of refunds, and customer care to mention but a few.
Billing alone has dependencies from other business units and departments outside the Finance Business Unit such as Technical Services to ensure correct tariff setting and consumption that is measured through accurate meter readings. Then Community Services assist with registration, verification and maintenance of indigent households.
The ability of numerous municipalities to generate revenue is undermined by the inactive participation of certain business divisions or departments, such as Development and Town Planning, Legal Services, and Information Technology within Corporate Services.
Municipalities must integrate the People, Process and Technology Framework in their business operations and intentionally leverage the technology component of the framework. That, however, requires
targeted development of people, bespoke processes and massive investment in technology infrastructure.
Municipalities must integrate the People, Process and Technology Framework in their business operations and intentionally leverage the technology component of the framework.
The Revenue Value Chain is seeing the deployment of innovative technological solutions. Development and Town Planning business units can effectively use Geographic Information Systems (GIS) to detect revenue leakages if GIS data can be regularly compared with other data sources, such as the General Valuation Roll and the Billing System.
The GIS can identify developments and property upgrades, and ongoing reconciliation could ensure that
Zolani Zonyane Director, CGFO Chartered Government Finance Officer
municipalities bill the right rates for properties whose market value has appreciated.
Another risk where accessible data is not exploited for decision-making is the lack of skills among those required to operate the systems in the absence of automated and networked information technology systems.
In the budget for the next three years up to the 2026/27 financial year, the National Treasury is allocating R2 billion as a contribution to a project of installing smart meters by municipalities and the funds will be channelled through Smart Meters Indirect Grant. The smart metering project requires an Automated Meter Reader System that must have limited or no human intervention when data is collected from the meter to dumping data in the billing file.
The system must be able to collect, process, monitor, publish consumption and profile data daily for all metering points. This is important for billing purposes by ensuring that customers are billed based on actual consumption. Some of the bills that are unpaid by consumers for longer periods include disputes from customers due to consumption data inaccuracy.
In its quarterly publications on municipal revenue and expenditure performance, the National Treasury published in its 3rd quarter of 2023/24 financial report that municipalities were owed R338.34 billion as of the end of March 2024 and 87.3% or R295.18 billion >
was outstanding for more than 90 days. As a result, there is a greater need for basic services but less money coming in to pay for them. This keeps municipal resources out of public value creation through funding capital and operations activities.
Municipalities must make investments in technology
Municipalities need to make investments in technology that can identify a transaction at the point of initiation, such as when developing undeveloped land improving the value of an existing property and notifying other business units.
Let's look at a value chain where a developer wants to build new, upmarket residential properties or industrial parks. In this case, all business units involved in
the revenue value chain, like technical services, need to receive an automated message or alert right away to make sure that consumption points are installed, and the finance business unit needs to receive one as well, to make sure that billing will start as soon as the measuring points are installed.
An automated and integrated system is capable of closing revenue leakage and losses that are noticeable in some of the construction sites where property developments are taking place.
The number of bills that are unpaid for extended periods can be decreased to the point where some are written off as irrecoverable by involving residents through promoting their participation in providing accurate metre reading data for billing.
Customers can use a free municipal
application to encourage taking their metre readings and uploading data to the app, which interfaces with the municipal system. This can reduce the number of disputed bills resulting from inaccurate or non-existent metre readings, which leads to sustained estimated consumption for billing purposes.
A functional municipality makes sure that the fundamental reasons for its existence are upheld by making investments in human capital development to maintain and improve skills, designing processes to increase productivity and effectiveness, and relying on technology to facilitate business dealings with the municipality.
Embedding technology in MRM can result in higher revenue collection with more resources becoming available for the benefit of residents through the delivery of basic services.
Theauditofperformanceinformation isanessentialpartofpublicsector accountabilityandgovernance.This typeofauditgainedprominencein South Africa due to its crucial role inensuringefficiency,effectiveness andtransparencyinpublicservice delivery.
The Constitution of South Africa and the Public Finance Management Act (PFMA) provide a robust framework for the auditing of both financial and performance information.
To understand this type of audit, one first needs to differentiate it from financial and performance auditing. Financial auditing aims to provide an opinion on financial statements and performance auditing is focused on evaluating the actions taken by management to ensure economy, efficiency and effectiveness. Many confuse especially performance auditing with performance information auditing.
The former focuses on the socalled three E’s, while the latter aims to determine whether reported performance information is useful, reliable and compliant to legislative and other requirements. Van der Nest and Erasmus (2013) conducted a study in 2013 that found that major deficiencies still existed in the reporting of performance information.
An analysis of more recent reports from the Auditor-General of South Africa (AGSA) indicates that this situation has still not improved significantly.
These challenges will undoubtably have an impact on the audit of performance information as well. >
This article delves into the current status of performance information auditing in South Africa, examines its demand, and explores the challenges and opportunities in this field.
The AGSA's audits of performance information cover a wide range of government departments and public entities. This includes national and provincial departments, municipalities, and various public sector entities.
The objective is to ensure that these entities are delivering on their mandates effectively and that the performance information reported is reliable and useful for decision-making. The auditing process involves a thorough examination of the performance reports submitted by government entities. This includes verifying the accuracy of reported performance against predetermined objectives and targets.
Auditors also assess whether the performance indicators are welldefined, achievable, and aligned with the strategic goals of the entity. The AGSA publishes detailed audit reports highlighting the performance of public entities.
These reports often reveal significant issues such as inconsistencies in data, lack of proper documentation, and failure to meet performance targets. The findings are crucial for identifying areas that need improvement and for holding public officials accountable.
The demand for performance information auditing is driven by several factors but was mostly steered by the need for
public accountability, the need for accurate data to ensure proper decision making, the need to adhere to international standards and practices and other aspects such as specific donor requirements.
As the public sector does not have the same built-in performance measures of the private sector, accountability and transparency become more important, as citizens are increasingly demanding more evidence of how public funds are spent and whether the government is achieving its objectives.
A review of AGSA reports and other sources (Van der Nest & Erasmus, 2023; AGSA, 2019) reveal that the main problems regarding performance information in South Africa relate to unreliable and outdated information systems, inadequate coordination, inadequate resource allocation and inadequate leadership and oversight.
Outdated information also impacts on the effectiveness of performance information auditing, as inaccurate data hampers the audit process. Other audit challenges include capacity constraints for the AGSA as well as resistance from government entities to comply with audit requirements. The AGSA has limited capacity and simply cannot verify the accuracy of the performance information of all government entities.
In addition, public officials may resist scrutiny out of fear of audit findings. This normally manifests in
the form of a reluctance to provide information or to fully cooperate with auditors. To address these challenges will require a new approach and moving beyond mere traditional solutions. For example, to address capacity audit constraints, government organisations could utilise other audit resources such as internal auditors and consultants.
To focus only on capacity building initiatives may not be sufficient. Other potential solutions can include leveraging technology, such as data analysis tools, to address accuracy issues and implementing standardised reporting frameworks to improve reliability of performance information and enhance coordination among different government entities.
This, in turn, can also enhance the reliability of performance information audits. Additionally, the profession can also consider an entire policy reform to strengthen the legislative framework of both reporting and audit requirements. This will provide the profession with a more robust foundation and will provide much needed audit guidance to both external auditors, internal auditors and consultants.
Compliance can easily become a “tick-the-boxexercise”
Both performance managers and auditors should also move away from a mere “compliance mentality”. Compliance can easily become a “tick-the-box-exercise”,
losing the real reason behind the requirement.
Each performance indicator exists become of a specific objective that is based on a specific service delivery requirement. It is essential that managers and auditors understand both this link as well as the coordination that will be required to achieve the real objective. Citizens, civil society and other stakeholders should also be consulted regularly to ensure that one does not lose this perspective.
Performance information auditing is a crucial component of public sector accountability in South Africa. While some progress has been made in recent years, several challenges persist, both on the
side of government as well as assurance providers, negatively impacting the effectiveness and impact of the audit of performance information.
Addressing these challenges may require a paradigm shift that will include policy reforms, standardisation and in-depth stakeholder engagement.
As demand for transparency and accountability grows, performance information audits will play an increasingly important role in ensuring that public resources are used efficiently and effectively to achieve desired outcomes. However, the extent of this role will depend on how effectively the required paradigm shift can be applied.
What happens when auditors struggle to fulfill their professional responsibilities while meeting their auditee's expectations? This invariably leads to qualityt hreatening behaviour such as client avoidance or “ghost ticking.”
The power dynamics between audit consultants and their clients are clear-cut, which often impairs auditors' independence.
There is also an auditors’ agency problem which stems from the mechanism according to which auditors, herein referred to as “the agents” are being appointed to companies and paid for their services by the management. This, too, has the potential to impair the independence of agents.
Kemi Mathatho MBA, CFE, IAT(SA) SQR Audit Director
While Enron has become a ‘‘dumping ground’’ for everything bad about financial reporting and auditing in recent years, it is interesting that academics seem to have overlooked an article that described, with near certainty, a negotiation between the auditors and client management over the contents of the Enron financial statements.
The Sarbanes-Oxley Act of 2002 was enacted in response to these financial statement frauds that had cost market participants hundreds of billions of dollars in the USA.
It is worth noting that the Act was developed to improve management accountability and auditors’ reliability regarding financial statements’ quality and integrity.
In the current regulatory framework, the audit firms, rather than audit partners within the firm, must rotate off the audit engagement after a few consecutive years (e.g. a five-year time limit).
It has been established that a long-term relationship between an auditor and an auditee can create objectivity or independence issues; however, replacing one audit partner with another does not disengage the audit firm's interests in a long-term audit client.
This article relays a message of communication and integrity of auditor–client management negotiations. Part of it is to review the best possible remedies for auditees who object to audit propositions.
It also examines the research
conducted on both the underlying theoretical and the descriptive model of auditor-auditee negotiations and conflict resolutions.
It is important to document and understand the concerns raised by the auditees. Doing so helps one to strategise and agree on their risk assessments before they can scope the audit engagement.
It is the auditor’s function to understand the perspective of the auditee and the real reasons behind the auditee’s pushback, first before the auditor can explain the purpose of the audit and the importance of compliance with regulations, standards, or company policies.
Conceptually, one could say that management starts the negotiation by their choice of auditing practices. Modelling management incentives before negotiation is not part of this article and would require an extensive examination of risk assessment or tax implications to do it justice.
Reviewed documentation and scoping helps ensure transparency and accountability. If the pushback continues and is not addressed at the operational level, the matter may be brought up with senior management or the relevant authority within the organisation for guidance and resolution.
It is imperative to keep a professional attitude and refrain from becoming defensive or onfrontational, regardless of the degree of pushback. >
A follow-up is required to ensure that any agreed-upon steps are carried out and that the audit process proceeds without hiccups after addressing the auditee's concerns.
From the audit partner's perspective, negotiations may be about a central issue or a variety of issues, some being brought in if an integrative solution is sought.
About half the time, the partners anticipated that the issue under discussion would be revisited in subsequent years and that it would influence subsequent talks with the auditee.
According to the partners, the negotiation typically lasted, at least a few weeks and involved multiple audit companies and client participants.
The technical experts at the audit firm's national headquarters are crucial in ACM negotiations, and the company's internal exchanges and connections were described as a "professional, non-adversarial process."
The auditor saw the client’s audit
committee as only occasionally important, and people outside the two parties were seldom involved. The CFO is nearly invariably involved.
This is in line with the idea that negotiating is a frequent, if not routine, aspect of creating financial statements for the client.
Generally, the partners saw the auditor as having an expert edge and even understanding the client’s situation better than the client did.
The partners considered various external elements and external audit standards to be pervasively relevant. They also believed that technical ability was more important than negotiation skills.
There is a clear explanation of the audit process, including why certain procedures are necessary
• Transparency can help alleviate concerns and build trust.
• Look for areas of agreement and common goals.
• Highlight shared objectives and the benefits of cooperation in resolving issues identified during the audit.
• Be open to adjusting the audit approach or timeline if feasible without compromising the integrity of the audit process.
• Document any disagreements or pushback raised by the auditees and the resolution process.
Auditing negotiation is part of a stream of relations with the client, and dealing with it is associated with client service considerations, client retention, legal considerations and other complexities.
The audit partners were aware of the client’s circumstances, especially inherent risk, but seemed to see negotiation as part of serving the client rather than as an antagonistic process. They recognised that negotiation implied an initial disagreement but felt they and their firms had the expertise to reach an acceptable outcome and that the parties usually had a mutual desire to reach an agreement.
In conclusion, effective communication, understanding, and a collaborative approach are key to managing pushback from auditees during the audit process.
• Address specific concerns raised by the auditees. If there are misunderstandings or misinterpretations, clarify them promptly.
In addition, the article offers some ideas on how other researchers could collaborate in offering solutions to resolve disputes between audit firms and auditees.
William Gumede Associate Professor, School of Governance, University of the Witwatersrand and a Sunday Times columnist
Effective oversight from Parliament is critical in ensuring good governance, accountability and ensuring the performance of the public sector, whether the public service, state-owned entities (SOEs), and the institutions created to protect democracy, the institutions enshrined in Chapter 9 of the Constitution, such as the Human Rights Commission.
One of the key reasons for the collapse of good governance
across all spheres of government, and as a result has caused state failure, rising corruption and mismanagement, has been the failure of parliament to play its constitutionally mandated governance oversight role.
South Africa’s parliament, particularly the past two terms, has experienced debilitating failure. We often talk about a failed state, the failing of the public service, SOEs and agencies to deliver public services at all levels, butwe now have to talk about
a failed parliament - the lack of the legislature to hold ministers, the public service, SOEs and democratic oversight institutions accountable.
Parliament in 2015 adopted a new mission to provide “effective oversight over the Executive by strengthening its scrutiny of actions against the needs of South Africans”.
Parliament's failure to hold the Executive (Cabinet), public service, SOEs and democratic oversight institutions, accountable has contributed to systemic state failure, poor public services, and runaway corruption.
One obvious reason for Parliamentary failure is that many ANC legislators wrongly see the ANC as the party and its leadership, as above parliament, the constitution, and their individual consciousness. This means that many MPs toe the party and its leadership line, ahead of the constitution, their lawful and moral duties and individual consciousness as MPs.
In 2022, ANC Chairperson Gwede Mantashe warned ANC MPs that they face expulsion if they voted against the ANC party line on the section 89 independent panel of experts’ report that suggested President Cyril Ramaphosa may have contravened the Constitution with regards to the much-publicised Phala Phala farm saga.
ANC secretary-general Fikile Mbalula startlingly revealed that the ANC leaders had lied to parliament in 2014 to protect the ANC and SA President Jacob Zuma from
accountability after the former president spent R246m on public funds to renovate his Nkandla compound. Zuma had denied doing so. This was undermining parliament’s authority.
In 2016, the Constitutional Court judged that parliament had failed to exercise its “obligations to scrutinise and oversee executive action and to maintain oversight of the exercise of executive powers by the President.” This was after the majority of MPs in the National Assembly endorsed a report by the legislature’s “Ad Hoc Committee on Police Minister’s Report on Nkandla” (appointed by the assembly in 2015), which wrongly exonerated former President Jacob Zuma from using public funds to renovate his private home, Nkandla.
Parliament in 2015 adopted a new mission to provide “effective oversight over the Executive by strengthening its scrutiny of actions against the needs of South Africans”. Parliament in its strategy plan said: “In any democracy, the link between the Legislature and the Executive is critical for
ensuring that government delivers, the Executive is held to account, that policies are subject to rigorous debate and that questions are asked when things go wrong.”
Parliament’s 2015 strategic plan noted: “Accountability is essential to democracy. There are several weaknesses in the accountability chain, with a general culture of blame-shifting. The accountability chain has to be strengthened from top to bottom, with a strong focus on strengthening oversight and accountability. In any democracy the link between the Legislature and the Executive is critical for ensuring that government delivers, the Executive is held to account, that policies are subject to rigorous debate and that questions are asked when things go wrong.”
There are several reasons for Parliamentary failure. The quality of Members of Parliament in South Africa has declined dramatically, compared to former President Nelson Mandela's immediate postapartheid generation who came to power after formal apartheid ended in 1994. Now, shouting insults, >
slogans, outdated ideologies, anti-intellectualism, and violent behaviour has become the norm, replacing evidence-based engagements, reason, and common decency.
This Parliamentary term ending May 2024, has seen the highest level of absenteeism - with some MPs rarely attending committee meetings, where key decisions are made. In cases where MPs are in attendance, many frequently doze off or are obviously unprepared or not mentally present.
This term's Parliamentary session has been the most unproductive since the end of apartheid. The least laws have been approved. Often committees do not quorate because not enough members turn up. Committees are the engine room of parliament, the pillars of parliamentary governance, where the decisions are made, and where public entities, agencies and ministers are held accountable.
This means that committees are often not in a position to properly scrutinise policies, institutions, and public officials. Absenteeism has undermined Parliament’s capacity to ensure that the government delivers, the Executive is held to account, and that policies are subject to rigorous scrutiny.
The quality of Members of Parliament in South Africa has declined dramatically, compared to former President Nelson Mandela's immediate postapartheid generation who came to power after formal apartheid ended in 1994.
Not surprisingly, a large number of laws put forward by Parliament, have been rejected by the Constitutional Court for being unconstitutional, irrational, and faulty. The largest number of MPs have been accused of or are under investigation for corruption or one or the other wrongdoing. Former Speaker of Parliament Nosiviwe Mapisa-Nqakula was forced to resign and was charged with multiple counts of corruption.
The new Parliament has to introduce harsher sanctions for absenteeism, to MPs accused of corruption and introduce the principle of secret voting on all critical issues as a rule.
Parliamentary committees must make their deliberations more widely available to the public – including responses to their questions by ministers
and managers of public service departments, SOEs and Chapter 9 institutions.
Furthermore, committees must secure the advice of non-state stakeholders, independent experts, civil society, and consumers. Parliament should introduce a rule whereby chairpersons of committees are from opposition parties – not the governing party.
Parliament must adopt a secret ballot for voting on all critical issues to allow MPs to exercise their conscience without fear of reprisal by their party leaders. South Africa’s electoral system constrains parliament’s ability to hold Cabinet accountable.
South Africa has a closed list system of proportional representation, whereby individual parties designate candidates to be elected, rather than constituencies voting candidates in. Voters vote for the party, not individual candidates. This means that the party has the seat – and many MPs feel they are accountable to the party that ‘gave’ them the seats.
A key part of the new electoral system changes to be introduced by the new parliament, as per the ruling of the Constitutional Court, must include a provision for voters to have a bigger direct say in selecting candidates for Parliament, not parties choosing candidates, as currently the case.
*Prof William Gumede is Associate Professor, School of Governance, University of the Witwatersrand. He was the convener of the course on public policy for all Members of Parliament in South Africa. He is Founder and Executive Chairperson of the Democracy Works Foundation. *
Dr Jana Kritzinger CA(SA), PhD (Auditing)
Audit quality is central to the audit profession's legitimacy and public interest role (Simnett, 2022). This topic is extensively debated by scholars, practitioners and regulators who agree that audit quality is multidimensional.
Audit firm culture is an indicator of audit quality (Alberti et al., 2022) and is considered as such in the IAASB’s newly released International
Standard on Quality Management (ISQM 1) which requires audit firm leadership to manage and foster a quality-oriented culture that permeates all aspects of the audit firm’s functioning (IAASB, 2020).
Organisational culture is the shared values, beliefs and assumptions that characterize an organisation (Schein & Schein, 2017). It reflects an organisation's personality and guides how employees think, feel and behave.
However, organisational culture is dif fi cult to measure, and therefore organisational climate is used as a lens through which to understand culture. Organisational climate refers to the observable characteristics of the work environment, as perceived by employees (Patterson et al., 2005).
Thus, while climate explains “what” is seen and experienced in an organisation, culture is much deeper and can explain “why” employees think these things happen (Beus et al. 2020).
Little is known about what a qualityoriented culture looks like in audit fi rms or how it develops (Francis, 2023) and this is probably because there is no generally accepted instrument to measure the audit quality climate in audit fi rms. The author undertook an exploratory study to address the gap. It was the fi rst step to develop an “Audit Firm Quality Climate” (AFQC) measurement instrument to be able to measure the audit quality climate in audit fi rms.
Quantitative research was conducted to explore what nonexecutive employees ( fi rst-year trainee auditors to senior audit managers) of large South African audit fi rms and the AGSA perceive as audit quality climate dimensions. This was an ideal context for such a study, because the South African audit profession has intensi fi ed its efforts to deliver audit quality amidst its current crises.
For example, the profession has developed a set of audit quality indicators (IRBA, 2019), contributed to the development of the IAASB’s new quality management standards (SAICA, 2019), and promoted transparency reports to ensure practices align with the requirements
of ISQM 1 (IRBA, 2022). Despite these efforts, public perception of the audit profession has been negatively affected due to auditors’ involvement in state capture and high-pro fi le corporate scandals.
The study was speci fi cally aimed at non-executive employees because their perceptions of audit quality are under-represented in the audit quality literature (Francis, 2023). However, their voice matters because they collect the bulk of audit evidence, are at the forefront of identifying audit issues, and their work provides the foundation for the audit opinion.
Furthermore, it was decided to involve large audit fi rms (the Big 4 and second-tier audit fi rms) and the AGSA, because they typically audit high-risk private and public entities, which require a public interest orientation and commitment to quality work.
The author used Patterson’s (Patterson et al., 2005) Organisational Climate Measure (OCM) as the basis for developing the study’s questionnaire. The OCM has 82 statements addressing 17 organisational climate dimensions.
It is a tested and validated measure that has been used in various contexts, but not in the audit fi rm environment.
The OCM’s statements were adapted to accommodate the audit fi rm context, audit fi rm employees, and the requirements of ISQM 1. During the adaptation process, one of Patterson’s dimensions (the Involvement dimension) was split into two separate dimensions: Involvement and Communication.
This was done because of the importance of audit fi rm communication in promoting quality work (Brown et al., 2019). An ethical dimension, with fi ve items, was also added as ethical values underpin a quality-oriented culture in audit fi rms (IAASB, 2020).
Two academic experts on organisational culture and fi ve auditors responsible for quality management in South African audit fi rms assessed the questionnaire's statements. They checked for any redundant items, suggested necessary additions, and ensured that the questions effectively measured what they were intended to measure. >
This resulted in a 100-item questionnaire that addressed 19 anticipated audit quality climate dimensions. Similar to Patterson’s OCM, a four-point Likert scale was used in the questionnaire that allowed for four response options (“definitely false”; “mostly false”; “mostly true”; and “definitely true”).
A pilot study was conducted at a second-tier audit firm to refine the questionnaire. The electronic survey was administered to 493 non-executive employees. After data cleaning, 167 responses (an effective 34% response rate) were available for data analysis. The author used SPSS for the data analysis and performed an exploratory factor analysis to determine the uni-dimensionality of the 19 anticipated audit quality climate dimensions.
The analysis identified one additional dimension (Quality noncompliance consequences) and
eleven redundant items, resulting in a final questionnaire with 89 questions addressing 20 anticipated audit quality climate dimensions. Figure 1 shows the process that was followed for the development of the final questionnaire.
Five audit firms (one Big 4 audit firm, three second-tier audit firms, and the AGSA) participated in the main study. In total, 7975 nonexecutive employees employed by these five firms were invited to participate in the study. Similar to the pilot study, the survey was conducted online, using the Qualtrix XM PlatformTM as data collection software.
The email explained the purpose of the study and contained a hyperlink to the web-based questionnaire. In addition to the 89 questions on audit quality, the questionnaire also contained demographic questions about the firm, and job level and gender of participants. A total 4456
responses were received and after deleting incomplete responses, 3885 responses were used for the data analysis (an overall effective response rate of 49%).
Using SPSS for the data analysis, a Cronbach’s coefficient alpha was calculated for each of the 20 dimensions. Cronbach’s coefficient alpha is the most frequently used reliability measure (Pallant, 2010). Values range from 0-1 and according to Hair et al., (2019) a Cronbach Alpha of 0.6 is acceptable for exploratory research.
The Cronbach Alpha for five dimensions (Communication (0.495), Formalisation (0.502), Outward Focus (0.403), Efficiency (0.392), and Effort (0.571)) was below the recommended threshold of 0.6 which means that these dimensions had an unacceptable
indicating an audit quality climate.
For the 15 dimensions with acceptable reliability (Cronbach Alpha >0.6) a mean score was calculated. This was interpreted as follows: a score between 1 and 2 means there was limited support for the statements; between 2.1 and 2.6 means there was some support; between 2.7 and 3.3 means there was support; and between 3.4 and 4 means there was strong support for the statements. Figure 2 shows the mean scores for the 15 audit quality climate dimensions.
The average mean score for the 15 dimensions was 3.1, indicating respondents’ support for a qualityorientated climate in audit firms. The highest scoring dimension was Ethics with a mean score of 3.6. The Pressure to produce dimension received the lowest support with a mean score of 1.9.
Four dimensions (Autonomy, Training, Quality, and Ethics) received strong support (mean scores between 3.4 and 4). These dimensions were perceived by respondents as key drivers of the firms' organizational quality climate, and audit firms need to preserve and build on these strengths.
Strong support for the Autonomy dimension shows that respondents believed their audit firms encouraged a questioning mindset, which gives them the freedom and independence to raise audit issues and improve work quality.
The result of the Training dimension shows that employees believed quality work was promoted through the firm's investment in training
application. Additionally, respondents felt strongly, as seen from the support of the Quality and Ethics dimensions, that their firms emphasized ethical behaviour and high-quality engagements and had a quality-oriented “tone at the top”.
Five dimensions (Integration, Quality Non-Compliance Consequences, Tradition, Reflexivity, and Clarity of Organisational Goals) received support from respondents, with a mean score above the overall mean score of 3.1.
This shows that respondents valued trust, respect, cooperation, and communication within their teams. They believed their firms did not tolerate behaviour that could compromise audit quality, used established methodologies, regularly updated their objectives and processes, and clearly communicated quality goals.
Four dimensions (Involvement, Supervisory Support, Innovation and Flexibility, and Performance Feedback) received support from respondents, but the mean scores were equal to or below the overall mean score of 3.1.
Audit firms should improve employee perceptions in these areas by involving employees in decision-making about their work quality, prioritizing supervisory support, and understanding employee needs and efforts.
Fostering innovation and adopting new ideas are essential to keeping up with technology and developing staff. Additionally, improving how performance is measured and the feedback provided can motivate employees, signal valued behaviour, and help develop employee skills.
for the contention that the audit firm valued and ensured the well-being of its employees. A similar trend was reflected in respondents’ limited support for the Pressure to produce dimension.
This finding is concerning, as poor work/life balance is detrimental to staff morale and can undermine employees’ efforts to produce quality work. Audit firms should therefore implement initiatives that improve employees’ perceptions regarding these two dimensions.
Audit quality, the cornerstone of the audit profession, is only achievable when audit firms boast a qualityoriented culture which is reflected in their audit quality climate. This study explored the organisational climate dimensions to determine what non-executive employees, working in large South African audit firms and for the AGSA, consider to be indicative of audit quality.
In this way, the spotlight fell on the organisational climate in audit firms and the under-researched view of audit employees in the audit quality debate was explored. The findings showed that Patterson’s organisational climate dimensions are not all relevant to an audit quality climate in audit firms, and that additional dimensions come into play. Furthermore, the results of the study provide insights for audit firm leadership to better manage and promote audit quality amongst employees.
*Dr Jana Kritzinger is a Senior Lecturer at the College of Accounting Sciences in Unisa*
Thabang G Mahlangu Audit Senior at AGSA
As South Africa has enters a new era, there is an increasing need for courageous, ethical, accountable, capable leaders, who will guide the nation into a brighter future.
Why is this a pivotal moment for the country? Well, South Africa has crossed the Rubicon, and for the first time in its nascent democratic history it has a hung government.
If there was a time in the history of
the country for high-ranking public officials to lead with integrity, it is now. Sadly, it has become difficult to exercise accountability and moral leadership in public service these days.
People who dared to question blatant irregularities, that notably conscientious person, in any position, have become victims.
Some argue that coalition governments, like those in countries such as Germany, Sweden and Denmark, offer better oversight and accountability. Discussions also cover broader electoral system reforms, potential destabilisation and the
need for strong and citizen-centric leadership post-2024 election.
In the realm of governance, it is important to understand the correlation between ethical leadership and efficient service delivery, as demonstrated by clean audits. Achieving an efficient and responsive civil service in South Africa requires leaders who embody courage, ethics and accountability.
It is essential to cultivate a culture of
ethical conduct and integrity, ensuring that mechanisms of accountability operate effectively, thus empowering the civil service to deliver essential services with reliability and efficiency.
Post the 2024 elections, the nation finds itself thrust into the forefront of a political spectacle. The populace is pondering the mechanics of governance in a landscape where coalition governments reign supreme in a multi-party governance.
A compelling body of research underscores the transformative potential of ethical leadership in driving tangible outcomes. A comparative study of two
municipalities in Mpumalanga Province by Rukuni, Maramura, and Mampa (2022) clarifies the profound impact of clean audits on service delivery. Their findings explain a direct correlation, wherein the attainment of clean audits engenders marked improvements in service delivery.
Supported by various works, this study underscores the critical role of ethical leadership in fostering effective and efficient service delivery. Notably, the study identifies key determinants, such as management support, the independence and competency of internal audit functions, and the quality of internal audit, as pivotal factors influencing
the attainment of clean audits and subsequent service delivery success.
An assessment of clean audit outcomes within Midvaal Local Municipality by Khasodi, Mahlala, and Hofisi (2023) sheds light on the transformative potential of ethical governance. Their study underscores the need for tangible outcomes arising from clean audits, specifically in the form of enhanced service delivery to citizens. Notably, Midvaal Local Municipality emerges as a beacon of success, boasting a track record of clean audits and exemplary governance practices.
In contrast, the lamentable state of many municipalities, as highlighted by the Auditor-General's reports, serves as a stark reminder of the difficulties in achieving clean audits and providing quality services as a result.
It is important to dispel the misconception that clean audit outcomes invariably correlate with good service delivery, and redirect focus towards the adoption of robust management practices that underpin both financial prudence and service excellence.
"The Nexus between Ethical Leadership, Clean Audits, and Service Delivery: Insights from Midvaal Local Municipality" – A study. In delving into the complex relationship between clean audits and service delivery, ethical leadership emerges as a pivotal force shaping governance paradigms. Sibanda et al. (2020) assert that failures of municipalities to achieve clean audit outcomes often stem from deficiencies in leadership, capacity and competency.
Conversely, the study underscores the transformative potential of ethical leadership in fostering a culture of moral conduct within municipal entities. Document analysis further emphasises that ethical leadership serves as a cornerstone of good governance, inspiring organisational excellence and promoting >
effective service provision within municipalities.
The research emphasises the signi fi cance of accountability, transparency, and strong compliance and control systems in maintaining good governance principles. It also graphically illustrates the cascade effect of unethical behaviours.
Within the context of Midvaal Local Municipality, rigorous consequence management emerges as a cornerstone of governance ef fi cacy. MLM's (2021) commitment to holding defaulting authorities accountable underscores the municipality's unwavering dedication to upholding ethical standards.
This commitment, coupled with a robust framework encompassing ethical leadership, consequence management, good revenue management, fi nancial prudence and accountability, positions the municipality advantageously to cater to the needs of its citizenry. As a result, the municipality's management practices translate into positive impacts on fi nancial viability, culminating in clean audit outcomes.
Unveiling the Interplay between Ethical Leadership, Clean Audits, and Service Delivery
According to the PFMA 2022-23 report by the Auditor-General of South Africa:
As we reflect on the AGSA General Report on the Audit Outcomes of All Auditees of the National and Provincial Government for the recent 3 years, it becomes evident that the interplay between Ethical leadership, clean audits, and service delivery is of great importance.
The report highlights that the majority of entities with outstanding, adverse, or disclaimer audit reports are facing challenges in effectively delivering services to the public. Additionally, certain entities have
experienced delays in submitting their fi nancial statements or have had outstanding fi nancial statements for a prolonged period.
In the PFMA 2022-23 report by the Auditor-General of South Africa, various problems were highlighted across sectors and high-impact auditees, particularly in performance planning and reporting, spending and fi nancial management, and infrastructure management. Three main root causes were identi fi ed as fundamental to these issues:
• A culture of no accountability and no consequences
• Ineffective resource management
• Inadequate intergovernmental planning, coordination, and support
The report goes into these root causes in the call-to-action section, offering recommendations to the accountability ecosystem on how to address them. Additionally, it discusses in the section on material irregularities how the material irregularity process contributes to mitigating these challenges.
Post-2024:
Examining Ethical Leadership and Voter Turnout Trends in South Africa
South Africans have seen how, in the case of former presidents, the perceived moral leadership of each leader appeared to be directly correlated with voter turnout and confidence in the ruling party. This is a perception worth exploring together with a historical timeline.
Here we explore the voter turnout percentages, leadership transitions, and key milestones that have s haped the country’s democratic path, leading to each election year.
1. 1994: New Dawn
• Voter Turnout: 86.87%
• Nelson Mandela leads South Africa's first non-racial democratic elections, marking the birth of the Rainbow Nation.
2. 1999: African Renaissance
• Voter Turnout: 89.60%
• Thabo Mbeki assumes office as President, and ANC signs a peace pact with IFP, marking a significant step towards national reconciliation. South Africa becomes a full member of the G20.
3. 2004: Challenges and Controversies
• Voter Turnout: 76.70%
• Thabo Mbeki secures reelection amidst challenges. Constitutional Court orders the provision of nevirapine for AIDS treatment. Health care professionals stage a four-week-long wage strike.
4. 2009: Turbulent Times
• Voter Turnout: 77.30%
• Jacob Zuma assumes presidency amidst economic recession and social unrest. Life Esidimeni tragedy unfolds. Notable events include the Marikana Massacre and the disbandment of the Scorpions.
5. 2014: Struggles and Setbacks
• Voter Turnout: 73.48%
• The country's credit rating is downgraded, and the Public Protector orders the repayment of funds for President's residence renovations.
6. 2019: Hope Amidst Challenges
• Voter Turnout: 66.05%
• Cyril Ramaphosa assumes presidency amidst ongoing challenges. Jacob Zuma resigns as president.
7. 2024: Facing the Future
• Voter Turnout: 58.64%
• Cyril Ramaphosa retains presidency amidst declining voter participation. Controversial legislation on National Health Insurance is passed into law.
This historical record captures South Africa's journey through democracy, highlighting significant events, challenges, and ethical lapses that have shaped its political landscape.
even in the face of uncertainty or adversity. They demonstrate moral courage by adhering to their values and principles, even when it may be unpopular or difficult.
Transformative Examples of Courageous Leadership: Driving Ethical Conduct and Moral Integrity for a Better South Africa
The following are individuals who took bold steps to uphold ethical conduct and the high moral ground, setting great examples.
1. Father Stanislaus Muyebe and the State Capture Probe: A group of Catholic priests, led by Father Stanislaus Muyebe, courageously approached the Public Protector, urging the office to investigate claims of corruption which ultimately led to the commission of inquiry into state capture.
2. Marie Collitz and the Life Esidimeni Tragedy: Mrs. Marie Collitz played a pivotal role in seeking justice for the mentally ill patients mistreated and killed after being transferred from Life Esidimeni to various NGOs.
4. Thuli Madonsela's Investigation into Nkandla: The courageous investigative work of Thuli Madonsela shed light on the misuse of public funds in the R246 presidential upgrades in Nkandla, leading to accountability measures and the recovery of misappropriated funds.
These examples illustrate how courageous leadership can drive positive change and accountability in society. South Africa has benefited immensely from the actions of these individuals.
Globally, companies like Mackenzie, Glencore, and SAP have also repaid misappropriated funds, setting a precedent for ethical conduct. Locally, firms like Deloitte have returned funds to Eskom, contributing to the restoration of financial integrity.
Conclusion:
The need for courageous, ethical leadership:
Courageous leaders are not afraid to challenge the status quo, speak truth to power, and make difficult choices,
3. Arthur Frazer and the Phala Phala Whistleblowing: Arthur Fraser's bravery in blowing the whistle on corruption in the Phala Phala scandal exposed wrongdoing and prompted investigations into corrupt practices.
South Africa finds itself in a unique situation with a hung government. The outcome underscores the critical need for courageous, ethical, accountable, capable, and citizencentric leadership to navigate the complexities and challenges ahead. This article reaffirms the importance of such leadership in fostering unity, stability, and progress in our nation, despite the political landscape's uncertainties.
Suren Maharaj BCom, Hons BCompt, CA(SA), CGFO, RGA, F.Inst.D CEO of SM Consulting
Public sector accountability and consequence management remains a growing concern in South Africa and the lack of effective consequences for wrongdoing within public entities has led to a culture of impunity and corruption.
This issue not only undermines the rule of law but also erodes public trust in government institutions. The consequences of this lack of accountability are far-reaching, impacting the effectiveness and efficiency of public service delivery.
In order to address this challenge, it is essential to understand the root causes of the problem and develop targeted solutions to improve consequence management mechanisms within the public sector.
By holding individuals and institutions accountable for their actions, South Africa can begin to rebuild public trust and ensure that public resources are used for the benefit of all citizens. Very little steps
have been taken by municipalities to enforce accountability and consequence management.
The Auditor–General continually on a yearly basis raises a number of issues in the Consolidated Report on Local Government (MFMA) outcomes that include, amongst others, persistent non-adherence to financial management policies and prescripts, as well as the need to improve governance arrangements.
A significant number of municipalities have also incurred unauthorised, irregular as well as fruitless and wasteful expenditure and a cursory view suggests that amounts in this regard are increasing year on year.
The Municipal Finance Management Act (MFMA) requires councils to investigate all UIFW expenditure. Furthermore, municipalities are required to recover the UIFW expenditure from the responsible officials.
There are two components to accountability:
• Firstly, those who take actions or make decisions must take responsibility for these actions and decisions.
• Secondly, those who do wrong (transgress), do nothing (fail to act) or perform poorly should face consequences.
The most common findings involved unauthorised, irregular, and fruitless and wasteful expenditure
not being investigated.
This means that the municipalities did not take sufficient steps to recover, write off, approve or condone such expenditure. Municipalities are easy targets to criminals who believe that municipalities’ systems are weak, and their detection methodologies are inadequate and can be manipulated.
The lack of consequence management in the public sector in South Africa is a significant issue that undermines accountability and transparency within governmental institutions.
Despite numerous reports of corruption, mismanagement and maladministration, there is a prevalent culture of impunity where wrongdoers often escape punishment or face minimal repercussions for their actions.
This lack of accountability erodes public trust in the government and perpetuates a cycle of corruption and inefficiency. Without robust consequence management mechanisms in place, there is little deterrent for public officials to engage in unethical behaviour or abuse their power for personal gain.
As a result, the public sector in South Africa continues to suffer from systemic problems that hinder its ability to effectively serve the needs of the population. Implementing stronger consequence management measures is crucial to
restoring integrity and fostering good governance in the country.
Some of the challenges include:
• Lack of political will: Political interference and lack of political will to hold employees accountable for their actions.
• Inadequate policies and procedures: Lack of clear policies and procedures for consequence management, making it difficult to hold employees accountable.
• Ineffective leadership: Leaders who fail to lead by example and do not prioritize consequence management.
• Corruption: Corruption and nepotism, which can undermine consequence management efforts.
• Lack of resources: Insufficient resources, including funding and personnel, to effectively implement consequence management.
The lack of consequence management has significant impacts, including:
1 2 3 4
1. Lack of accountability: Employees are not held accountable for their actions, leading to a lack of accountability and a culture of impunity.
2. Inefficiency: Inefficient use of resources, as employees are not held accountable for their performance.
3.
4. Corruption: Corruption and nepotism are allowed to flourish, undermining the public trust.
5.
6. Erosion of public trust: The lack of consequence management erodes public trust in the public sector and government as a whole.
To address the lack of consequence management in the public sector in South Africa, several recommendations can be implemented to improve accountability and transparency.
• There is a need for clear and enforceable consequences for misconduct and corruption within the public sector.
• This includes implementing strict disciplinary measures for public officials found guilty of wrongdoing, including termination of employment and legal prosecution. Also providing sufficient resources, including funding and personnel to effectively implement consequence management.
• There must be regular audits and reviews of government entities to detect any irregularities or inefficiencies. These audits should be conducted by independent bodies to ensure objectivity and reliability.
• Clear policies and procedures for consequence management should be developed and implemented.
• Strengthen leadership in
which leaders should be held accountable for implementing consequence management and who must lead by example.
• Whistle-blower protection must be strengthened to encourage employees to come forward with information about misconduct without any fear of retaliation.
The Consequence and Management (CMA) Framework for Municipalities issued by National Treasury in September 2022 addresses the challenge that as long as there are no adverse consequences to mismanagement or incidents of corruption, officials will not refrain from such behaviour.
The CMA Framework provides information and guidance, from a Municipal Finance Management Act (MFMA) perspective, to deepen understanding of consequence management and accountability.
The CMA Framework draws from various legislation and elaborates on its linkages and alignment to strengthen public accountability and clarifies the roles of different stakeholders to assist in the practical implementation of process and procedures required to address instances of financial misconduct as defined in Section 171 of the MFMA.
Accountability and Consequence Management continues to be at the core of governance and constitutional democracy in South Africa. By addressing the challenges and implementing effective consequence management, the public sector in South Africa can improve accountability, efficiency and public trust.
This Women’s Month, we shine the spotlight on Kgothatso Maoko, a renowned figure in the auditing and accounting profession. Her journey from humble beginnings to global influence in auditing spans extensive experience in both the public and private sectors.
Sinazo Mondo chats to Maoko about overcoming challenges typical for women in the male-dominated fields of auditing and accounting, Maoko's story is both inspirational and impactful.
SM: Who is Kgothatso Maoko and what is her background in the field of public sector audit?
Kgothatso Maoko (KM): I’m an auditing professional and have worked in the public and private sectors. I have held positions at Deloitte, the Auditor General of South Africa (AGSA), Transnet State Owned Entity (SOE), and MTN where I served as the senior manager in fraud and forensics investigations, specialising in anti-bribery and corruption.
I currently serve as the Executive Head of Technical Unit and Professional Development at the Southern African Institute of Government Auditors (SAIGA).
SM: What challenges have you faced throughout your career?
KM: I have overcome numerous challenges, including Gender-based Violence (GBV), harassment, corporate bullying, and victimisation. Despite these obstacles, though, I have drawn strength from my faith and education, never allowing challenges to deter me from pursuing my dreams.
SM: What are your core values in leadership?
KM: Compassion, authenticity and humanity are at the heart of my leadership philosophy. I believe these values are essential for leading inspired teams and fulfilling my duties while staying grounded in my African roots and culture.
By Sinazo Mondo
SM: What are some of your career achievements?
KM: I have been recognised for my contributions, including awards such as employee of the quarter at MTN as the most innovative, Investigations Manager at AGSA, and for founding the data analysis Investigations unit at Transnet SOC. I also have expertise in fraud risk management, audit and forensic investigations.
SM: How do you contribute to the advancement of women in your field?
KM: I regard myself as a critical thinker, a visionary and a thought leader who actively promotes women in forensics, technology and innovation. I advocate for professional accreditation and mentor aspiring auditors as I aim to empower more women in traditionally male-dominated industries.
SM: What role do you currently hold at SAIGA and what are your responsibilities?
KM: I serve as the Executive Head of the Technical Unit and Professional Development at SAIGA. In this role, I develop and execute strategic plans to enhance the technical capabilities of the organisation, particularly focusing on leveraging technology like AI and big data for auditing purposes.
SM: What is your educational background and current academic pursuits?
KM: I hold a bachelor’s degree in accounting science, as well as qualifications in commercial forensic law and postgraduate degrees in investigative and forensic accounting. I’m currently pursuing a PhD, focusing on fraud and corruption in multinational enterprises within the African context at the University of Pretoria.
SM: How do you contribute to academia and professional development?
KM: With my expertise in data analytics and financial crime, I contribute actively to academia through research projects and memberships with organisations like SAIGA, ICFP, ISACA and ACFE, demonstrating her commitment to continuous learning and development in her field.
SM: What achievements or milestones have you accomplished?
KM: I recently completed an Executive Leadership Programme at Duke University, where I explored FinTech strategies in global markets. This experience has further fuelled my passion for female empowerment, financial literacy and fostering intergenerational wealth.
I have also been part of a research project at the University of Pretoria, testing transaction monitoring tools like the SAS SFM solution for MNEs. I developed a data analytics maturity implementation framework to assist MNEs and SOE’s in developing maturity models for fraud mitigation.
SM: What impact have you made in the field of public sector audit?
KM: My resilience, determination and expertise have propelled me to greater heights in the public sector audit. I continue to make a profound impact by advocating for accountability, good governance and transparency through strategic leadership and innovative approach.
SM: What inspired you to pursue and qualify as an RGA?
KM: I wanted to serve and bring dignity in the South African public sector, that contrary to the status
quo that public servants are qualified.
I wanted to contribute to capacity building as a Registered Government Auditor (RGA). I am not only just an RGA but also a seasoned fraud specialist, because corruption is very eminent government, I am also a visionary thought leader and Innovative catalyst, contributing to luminary roles of woman in Forensics, technology, and innovation. These opportunities and attributes came as a result of public sector exposure through the RGA designation.
SM: How has the RGA designation benefited you?
KM: My professional journey has been enriched by diverse experiences in auditing and public sector governance. I've conducted international audits for the Department of Home Affairs and DIRCO, focusing on performance information—a unique aspect within the RGA profession. As a public sector specialist well-versed in the Municipal Finance Management Act (MFMA), I played a pivotal role in Covid-19 initiatives for municipalities.
Additionally, I served as Assistant Audit Manager for state-owned entities (SOEs) like Transnet, Eskom, and SAA, overseeing Supply Chain Management (SCM). The RGA qualification enabled me to specialize in data analytics and financial crime, culminating in a dissertation that contributed to academic research for SOEs and multinational enterprises.
My contributions extend to collaborating on testing transaction monitoring tools and designing data analytics frameworks at the University of Pretoria. Notably, I represented our sector in the UK through the Woman Executive Leadership Development Programme, >
leveraging insights from the RGA designation in combating fraud.
These experiences have shaped me into a recognised figure in auditing and governance, bridging academia and practical application on a global scale.
SM: What advice do you have for women considering this path, especially those who may have doubts?
KM: The RGA designation gave me a platform to understand and master forensics where I got an opportunity even within the private sector as a group senior manager at MTN, heading the fraud and forensics function at MTN group Fintech where I was:
• Tasked with providing expert advice on strategy, risk, and compliance within the Compliance and Financial Crime unit. My role extended to assisting Group Finco in supervising Anti-Bribery and Corruption, Fraud Prevention, and Forensic Investigations, ensuring adherence to regulatory standards across our operations globally. I oversaw the whistleblowing program, ensuring it operates effectively for customers, staff, and third parties.
• Additionally, I supported compliance with internal Group Finco processes, policies,
and relevant laws across our footprint. A significant aspect of my responsibilities involves developing a fraud prevention strategy tailored for Fintech to combat Fraud and Financial Crime. This included implementing investigative mechanisms and collaborating with first- and third-line functions to address and report fraudulent activities.
• My approach aligned with best practices in the Fintech and Financial Service sectors, as well as local and international regulations like Anti-Bribery and Corruption and Anti-Money Laundering laws.
• I successfully rolled out comprehensive Fraud Prevention strategies, policies, plans, anti-fraud programs, and
monitoring tools across 16 countries in Africa, alongside creating awareness and conducting training on Fintech Fraud prevention.
So, the sky is the limit! There are countless opportunities and an appetite for RGA’s not only in SA but globally.
SM: What lessons can be learned from your journey?
KM: My journey underscores the importance of resilience, integrity and continuous learning in achieving professional success. My story serves as an inspiration for women in auditing and beyond, showcasing how personal fortitude and dedication can drive meaningful change in any industry.
As we mark our 36th anniversary, we extend our heartfelt gratitude to our members, partners and stakeholders Your unwavering support and dedication have been instrumental to our journey
We look forward to many more years of collaboration and success
Be Part of Our Future: Explore the opportunities and the many benefits of being a part of SAIGA
Together, let’s continue to lead the way in public sector auditing and accounting.
us in commemorating this remarkable milestone and be inspired by our vision for the future
Iris Mosima Maekela CEO and Founder of Mosima Accountants and Associates Professional Accountant S & General Tax Practitioner SA
Non-profit organisations (NPOs) in South Africa are crucial in addressing societal challenges, ranging from poverty alleviation to healthcare provision, however, these organisations often face significant barriers in securing funding primarily due to a lack of information resources.
The government, recognising the vital contributions of NPOs, has implemented various interventions to address these challenges and improve the overall funding landscape for non-profits.
The South African government has undertaken several initiatives to support NPOs in overcoming information resource insufficiency. These efforts include:
• Policy Development and Implementation: The government has developed policies to create an enabling environment for NPOs. Key policies focus on promoting transparency, enhancing access to information, and ensuring equitable distribution of resources.
• Establishment of Support Structures: Various government agencies and bodies have been established to support NPOs. These include the Department of Social Development (DSD), the National Development Agency (NDA), and the South African Revenue Service (SARS), which provide guidance, resources, and support to NPOs.
• Funding Platforms and Databases: The government has developed online platforms and databases to centralise
information about funding opportunities. These resources are designed to be comprehensive and user-friendly, helping NPOs navigate the funding landscape more effectively.
• Capacity-Building Programmes:
To enhance the capacity of NPOs, the government offers training and workshops on various aspects of organisational management, including financial management, governance, and digital literacy. These programmes aim to empower NPOs with the skills needed to access and utilize funding resources effectively.
The South African government’s policy framework for the non-profit sector
aims to ensure that NPOs have access to the information and resources needed to secure funding. Key policy initiatives include:
• The National Development Plan (NDP): The NDP outlines the government’s commitment to supporting the non-profit sector through policy reforms and strategic investments. The plan emphasizes the importance of a robust and well-resourced nonprofit sector in achieving national development goals.
• Public Finance Management Act (PFMA): The PFMA promotes transparency and accountability in the management of public funds and includes grants and funding allocations to NPOs. By enforcing stringent financial management practices, the government aims to ensure that funding is distributed fairly and efficiently.
Government agencies support NPOs by providing technical assistance, resources, and funding opportunities. Key agencies include:
• Department of Social Development (DSD): The DSD is responsible for overseeing the registration and regulation of NPOs. It provides resources and support to help NPOs comply with regulatory requirements and access funding.
• National Development Agency (NDA): The NDA focuses on capacity-building and funding support for NPOs. It offers grants, technical assistance, and training programs to enhance the operational efficiency and sustainability of NPOs.
• South African Revenue Service (SARS): SARS provides tax incentives and benefits to >
registered NPOs, helping them reduce operational costs and access additional funding sources.
The government has invested in developing online platforms and databases to centralise information about funding opportunities. Notable platforms include:
• NGO Pulse Portal: Managed by SANGONeT, the NGO Pulse Portal provides a comprehensive database of funding opportunities, resources, and news relevant to the non-profit sector. It is a centralized hub for NPOs seeking information on grants and funding sources.
• Central Supplier Database (CSD): The CSD, managed by the National Treasury, includes a section for NPOs to register and access funding opportunities from government and private sector sources. This database streamlines the application process and ensures that NPOs can access up-to-date information on available funds.
To address the digital literacy and capacity challenges faced by NPOs, the government offers various training programs and workshops, such as:
• Financial Management Training: These programs focus on enhancing the financial management skills of NPO staff, helping them prepare accurate financial reports and manage funds effectively.
• Governance and Compliance Workshops: These workshops guide best practices in governance and compliance,
ensuring that NPOs adhere to regulatory requirements and maintain transparency in their operations.
• Digital Literacy Initiatives: Recognising the importance of digital skills in accessing funding, the government has launched initiatives to improve the digital literacy of NPOs. These programs cover topics such as using online platforms, digital marketing, and data management.
While the government has made significant strides in supporting NPOs, several challenges remain:
• Resource Constraints: Limited funding and resources can hinder the effectiveness of government initiatives. Ensuring adequate funding for support programs is essential for their sustainability and impact.
• Awareness and Outreach: Not all NPOs know about the available resources and support structures. Increased outreach and awareness campaigns are needed to ensure NPOs can access the information and the support they need.
• Collaboration with Private Sector: Strengthening partnerships between the government and private sector can enhance the availability of funding and resources for NPOs. Collaborative efforts can lead to more innovative solutions and greater impact.
Despite these challenges, there are opportunities to enhance government support for NPOs:
1. Enhanced Collaboration:
Strengthening collaborations between government, private sector, and civil society can lead to more effective support structures and resources for NPOs.
2. Technological Advancements:
Leveraging technology can improve the accessibility and usability of funding platforms and databases. Innovations such as mobile applications and AI-driven tools can streamline information dissemination and application processes.
3. Continuous Capacity Building:
Ongoing training and capacitybuilding initiatives are crucial for ensuring that NPOs remain equipped to navigate the evolving funding landscape. Continuous professional development programs can help NPOs stay updated with best practices and new opportunities.
The South African government has taken significant steps to address the lack of information resources for NPOs in acquiring funding. Through policy development, establishing support structures, creating funding platforms, and implementing capacitybuilding programs, the government aims to enhance the sustainability and effectiveness of the non-profit sector.
Addressing the remaining challenges and seizing opportunities for improvement can further strengthen the government's support for NPOs. By fostering a collaborative environment and leveraging technological advancements, the government can ensure NPOs have the necessary resources and information to secure funding and achieve their missions, ultimately contributing to positive social change in South Africa.
Mookgo Mareletse Senior Manager: Governance,
Risk & Compliance at South African Weather Service
Certified Risk Management Practitioner by IRMSA
SAIGA Stakeholder
Artificial intelligence (AI) is truly a revolutionary feat of computer science and set to become a core component of all modern software over the coming years and decades.
AI will be deployed to augment both defensive and offensive cyber operations. Additionally, new means
of cyber-attack will be invented to take advantage of the weaknesses of AI technology.
Finally, the importance of data will be amplified by AI’s appetite for large amounts of training data, redefining how we must think about data protection. Prudent governance at the global level will be essential to ensure that this era-defining
technology will bring about broadly shared safety and prosperity.
Not only does it pose a threat but is also presents an opportunity.
In general terms, AI refers to computational tools that have the ability to substitute human intelligence in the performance of certain tasks. This technology is at present advancing at a breakneck pace, much like the exponential growth experienced by database technology in the late twentieth century.
Databases have grown to become the core infrastructure that drives enterprise-level software. Similarly, most of the new value-added from software over the coming decades is expected to be driven, at least in part, by AI.
Within the last decade, databases have evolved significantly to handle the new phenomenon dubbed “big data.” This refers to the unprecedented size and global scale of modern data sets, largely gathered from the computer systems that have come to mediate nearly every aspect of daily life. For instance, YouTube receives over 400 hours of video content each minute (Brouwer 2015).
According to the article “Benefits of Artificial Intelligence in the Workplace” published in Great Minds Consulting in October 2023. Some AI tools can help with support outside the company. They gain experience from actual sales and clients and use this to assist customers in purchasing >
goods and services. Some can handle the marketing through the digging of data, both for the public and the companies. For job functions such as Human Resource Management, these tools have capabilities to amplify writing platforms, compiles various job postings and puts forward to consideration suitable content to encourage the submission of more applications from job seekers.
Here are some of the few AI tools that are currently available for use and their capabilities, in the private and public sectors:
• IA for time management - Notion AI is a productivity tool that you can use as a time management application. It allows you to assign tasks to specific team members, improve team collaboration with to-do lists, and create highly detailed project goals.
• Grammarly - a tool to assist with grammatical and spelling errors for report writing.
• Read AI - makes your meetings, emails, and messages more efficient with AI-generated summaries, transcripts, playback, and highlights.
• MeetGeek - is an AI meeting assistant that automatically video records, transcribes, summarizes, and provides key insights from every meeting.
• ChatGPT - Use it for engaging in conversations, gain insights, automate tasks, and witness the future of AI, all in one place.
• Canva - online graphic design tool. Used to create social media posts, presentations, posters,
videos, logos and more.
• Udemy - is an online training and learning marketplace to explore the expansive library of thousands of topics with cuttingedge online video courses in Coding, Development, Python, Java, and Business.
Although, there might be an increasing positive encouragement on the use of AI tools, the downside in the public sector could be around the lack of AI governance which must outline frameworks for the use of various tools.
Although, there might be an increasing positive encouragement on the use of AI tools, the downside in the public sector could be around the lack of AI governance which must outline frameworks for the use of various tools. The fact that there is no prescribed Act on the use of different AI tools and polices that provides guidelines for usage of AI tools in the workplace can be a serious threat on the integrity and confidentiality of the government information.
Public Auditors may find it difficult to audit the information prepared through these tools, especially where latest AI tools have been
utilised. The data input gives the exact data out and this can be a compromise on accuracy and reliability of input. Because these tools are managed or hosted externally, this also elevates the risk of cyber-attacks.
Employees may heavily rely on AI tools, and this may affect productivity, skill, knowledge and decision-making processes.
There is a huge risk of leaking of information since these tools gets inputted with confidential data and the hosts of the tools are mostly outside of the government institutions and no service level agreements exists between the two parties. This may result in compromises on public trust.
In conclusion, the AI National Government Sumit Discussion Document by Alfred “Ali” Mashishi on behalf of the Department of Communications and Digital Technologies (DCDT) indicates that since South Africa belongs to several international bodies that outline the basic boarders of how AI can be approached towards the fulfilment of national priorities such as the United Nations, International, Telecommunications, Union, UNESCO, and OECD. These would have been researched to ensure that proper flow of South Africa’s approach is within the global regulations. Extensive research would still need to be done for policy making.
Good Governance Africa (GGA) is set to tackle the growing disaffection and lack of engagement with democracy across the continent with the launch of its Young Advocates for Good Governance Programme.
The programme aims to inspire, mobilise and train over a million people in Africa, particularly youth, to become nonpartisan advocates for good governance, both between and within election cycles.
GGA, established in 2014 by Robert Rose, is an independent pan-African non-profit organisation with offices in South Africa, Ghana, Nigeria, and Ethiopia, and is in the process of expanding to more countries on the African continent. The organisation focuses on identifying governance deficiencies, providing solutions and promoting good governance. With a vision of an empowered Africa where governments are effective, businesses thrive, and poverty is eradicated, GGA strives to be the leading partner in advancing good governance.
The Young Advocates for Good Governance Programme will first be implemented in South Africa before expanding to at least six other African countries. This expansion will address the growing disconnect between highly regarded democratic institutions and youthful citizens who are increasingly disenchanted with democracy.
five core objectives:
Mobilise and empower African citizens, especially young people, to participate and become advocates for good and democratic governance. The goal is to recruit one million young people by 2029.
Educate and train governance advocates on good governance principles and how good governance can contribute to the improvement of citizens’ lives in Africa.
Increase youth citizen engagement in elections by motivating higher voter registration and turnout rates, as well as civic participation in their national and local governance structures.
Better inform young citizens about existing accountability mechanisms and encourage the development of additional mechanisms.
Work with partners to create a training programme, available both online and in-person, tailored to each “young citizen advocate.”
Young Advocates for Good Governance Programme aims to achieve these outcomes by:
Raising youth citizenship engagement to five times the current levels.
Create networks among young people participating in the project.
Engage other organisations that can absorb young people for internships and job opportunities.
Create opportunities for exchanges with other institutions within the African continent and the world.
Develop a best practice template for mobilising young people to enhance democratic participation.
Ensure that 70% of young citizens in targeted regions fully participate in democratic activities.
Inform policy directions for local election institutions on voter education.
Influence policy and practice at national and continental levels.
Partner with like-minded organisations.
From the outset, GGA will implement a robust monitoring, evaluation, and learning system to measure the impact of the project. This includes assessing changes in citizen engagement during and between elections and providing detailed insights to project funders and partners.
Between elections, we will assess our efforts through pre-intervention and post-intervention representative community surveys. By doing this, we will be able to provide project funders and partners with granular insights into the efficacy of our interventions, and in a manner that best enables the Young Advocates for Good Governance Programme to scale up.
GGA brings significant expertise to the Young Advocates for Good Governance Programme, including:
Conducting high-quality research to influence policy shifts and solve challenges related to environmental degradation, climate change, under-development, and youth unemployment.
Using the Governance Performance Index (GPI) to assess local government performance
Publishing thought leadership articles and facilitating public engagements and dialogues on governance issues.
As GGA prepares to launch the Young Advocates for Good Governance Programme, the organisation remains committed to its mission of improving citizens’ lives through effective governance and strategic partnerships. This ambitious programme is set to make a lasting impact on the democratic landscape of Africa.
Siyasanga Nondlazi Standard-setter at the Accounting Standards Board
TosupporttheapplicationofGRAPStandardssothatfinancial statementsareusefultousersinthepublicsector,theASBrecently presentedataGRAPupdatewebinarhostedbytheSouthAfrican InstituteofGovernmentAuditors(SAIGA).
The primary objective of the webinar was to ensure that SAIGA members are kept abreast of the GRAP reporting landscape. Key financial reporting developments in the Standards of GRAP are included in the following link:
SAIGA GRAP updates
Webinar facilitated by the Accounting Board Standards20240426_120440-Meeting Recording.mp4
What GRAP developments should auditors be aware of for 2023/24?
It is important that auditors are aware of all new and amended pronouncements for the 2023/24 reporting period as outlined in Directive 5 on Determining the GRAP Reporting Framework, to ensure the application of the most recent pronouncements are audited.
Pronouncements that become
effective in the 2023/24 reporting period are:
• IGRAP 21 on The Effect of Past Decisions on Materiality
• Amendments to GRAP 25 on Employee Benefits
• Amendments to GRAP 1 on Presentation of Financial Statements
• Guideline on Accounting for Landfill Sites
• Improvements to the Standards of GRAP 2020
It is also crucial for auditors to consider those pronouncements that will be effective in future reporting periods. This will assist auditors in confirming that information on these pronouncements have been disclosed in the financial statements.
Have you ever considered the impact of past decisions about materiality on future reporting periods?
In engagements with financial statement preparers, it was often highlighted that, when they had not applied the Standards of GRAP to immaterial items, auditors required them to keep a record of these past immaterial transactions. This was so that preparers could assess if these transactions would have a material effect on the financial statements over time. Where it was considered that these past transactions were cumulatively material, retrospective adjustments were required to the financial statements.
Stakeholders raised concerns that keeping record of past immaterial transactions is onerous and negated the benefit of applying materiality. In addressing this concern, the ASB provides guidance in IGRAP 21.
Key issues addressed in IGRAP 21 include:
• Do past decisions about materiality affect future reporting periods?
• Is applying an “alternative accounting treatment” (i.e. an accounting treatment different to what is required by the Standards of GRAP for immaterial items) an error, or a departure from the Standards of GRAP?
IGRAP 21 can be accessed on the ASB website using by clicking: https://www.asb.co.za/igrap-21/
To keep GRAP Standards relevant and implementable, changes are often made to align with International Public Sector Accounting Standards (IPSAS) developments. GRAP 25 on Employee Benefits is one such Standard that was updated to align with international requirements, while considering local needs.
Primarily, the changes were to introduce new components that are presented for defined benefit plans in the Statement of Financial Position and the Statement of Financial Performance. Other changes include to provide clarity and guidance on other long term employee benefits and termina-tion benefits, as well as new guidance on disclosure.
The amendments aim to clarify the application of materiality and aggregation in financial statement preparation. This clarification was necessary to ensure that entities are better positioned to present financial information that is relevant to stakeholders.
Concerns were raised by stakeholders about the inconsistent accounting practices for landfill sites and the related rehabilitation provision where entities undertake waste disposal activities. The guideline provides guidance on accounting for land, the landfill site asset and the rehabilitation provision
based on existing requirements in the Standards of GRAP.
The guideline improves comparability and provides the necessary information to the users of the financial statements to hold entities accountable and for decision making. Auditors are encouraged to familiarise themselves with the principles in this guideline and ensure that audited financial statements are compliant.
Improvements the Standards of GRAP are minor amendments to the Standards to align them with international equivalent standards. An entity shall apply these amendments prospectively in accordance with GRAP 3 on: Accounting Policies, Changes in Accounting Estimates and Errors.
When initial application of a Standard of GRAP affects the current period, any prior period, or might affect future periods, an entity is required to disclose the impact of the change in accounting policy in the notes to the financial statements.
Read https://www.asb.co.za/ frequently-asked-questions/ developed by the ASB for a detailed discussion on What disclosures should entities provide on newly effective Standards of GRAP?
Subscribe to the ASB’s YouTube channel and Newsletter (at www.asb.co.za) for easy access to information relating to GRAP developments. Stakeholders are welcome to provide inputs and suggestions on future topics by sending an email to info@asb.co.za.
Maletsatsi Marake (AGA) SA
Professional Accountant (SA)
Director: Guardian’s Fund
Department of Justice and Constitutional Development
Accountants and other public sector professionals are generally stereotyped as inefficient, lazy and incompetent. However, it could be worth considering the stereotype
of whether or not public sector accountants are appropriately described in that manner and whether or not they have access to the necessary resources and the required support.
Perceptions vs Reality:
1.Appointment/Recruitment
Perception – Some people think that one needs to know someone, have political connections, or even win someone over romantically, to get to a senior position in the public sector.
In all spheres of government, it is also critical to clarify that there are two types of appointments: political appointments, which are associated with national government ministries, provincial MEC offices, and local government mayor or speaker seats.
Reality - The public sector has begun to recognise registered professionals over and above their qualifications and experience. In
some job advertisements, affiliation with a professional body is mandatory whereas for others, it is an added advantage.
Other government departments are collaborating with professional bodies to facilitate career pathing and/or to attract qualified candidates.
2.Public sector is not a first choice
Perception - The public sector is often not considered the employer of choice with the private sector frequently seen as the ultimate career destination. Many
As part of performance development, an assessment of skill gaps should be conducted, and the department should identify the required set of skills annually to develop employees.
professionals opt to specialise in sectors such as mining, banking and construction.
However, it is not only puzzling but also disheartening that those who choose to work in the public sector are invariably viewed as incompetent, lazy or, worse, unambitious. This raises the pertinent question: who should work in the public sector?
Reality - For some, working in the public sector is a choice,
despite one having the skills and qualifications to succeed in the private sector. Public sector officials are driven by a passion to serve their country diligently. Some perceive it a calling to work in the public sector, committing to being the change they want to see and striving for a professionalised and efficient public sector.
Perception - A common misperception among accountants who join the public sector is that
it provides a low-stress work environment where they may study, take care of personal problems, or even take on other paid jobs.
Reality - Every position in an organisational structure has a purpose, and when one individual performs poorly, it can impact the effectiveness of the entire unit. Others are impacted since they must shoulder the additional burden. This might easily lead to both the unit's and the department's overall goals not being achieved. >
Accountants occasionally lack the necessary resources to perform their work effectively.
This could be due to various reasons, including poor planning and lack of budgeting. For example, while Microsoft Excel is commonly used to capture data, track performance and prepare financial statements, providing modern software could significantly enhance performance and motivation.
Any organisation without an effective and competent Internal Audit Function is missing a key element of good corporate governance. Internal audit significantly impacts the quality of financial reports.
For audit efficiency and assessment of internal controls, the external auditor must determine whether the work of the internal audit function can be used for audit purposes, assessing the level of competence as required by ISA 610, Paragraph 15 (Using the Work of Internal Auditors).
A widely held view is that internal auditors receive substantial support. Their membership fees are paid, and expenses for events linked to CPD hours, including accommodation and travel, are covered when the events are held outside town.
They are also allowed to attend these events during working hours. In contrast, accountants often need to prepare comprehensive submissions to receive the same benefits as internal auditors. In most cases, the learning and development units do not advocate for supporting professionals, particularly accountants. This is unfortunate because internal audit units operate after the fact,
reviewing transactions and financial reports that accountants have already processed and completed.
Although there is guidance issued by the Department of Public Service Administration, the public sector generally finds it difficult to implement retention policies effectively. This may be due to concerns about potential misuse of the policy.
A case in point occurred when the head of the department and the chief of staff told the MEC that an employee was intending to leave the department after receiving two job offers. The MEC interestingly responded, asking, "If she is so good, why are you not keeping her?"
This served to emphasise how the lack of effective retention policies deprives the public sector of the ability to attract and retain top talent.
There is a need to go back to the drawing board and develop effective formal succession planning, including personal development programmes
structured to empower and motivate employees to work harder and remain hopeful for the future.
As part of performance development, an assessment of skill gaps should be conducted, and the department should identify the required set of skills annually to develop employees. For example, providing training in data analytics and essential updates in GRAP/IFRS to keep accountants marketable, employable, relevant, and fully leverage their expertise.
Even though people find it uncomfortable to discuss poor performance, employees should get honest and constructive feedback. This ensures that they understand their responsibilities and are held accountable, which ultimately leads to proper service delivery.
Effective formal mentorship programmes should be implemented to boost employees' motivation. Appreciating the value of seasoned professionals mentoring young professionals until they are prepared and capable is crucial. More and more professionals can join the public sector and make a difference.
IS IT POSSIBLE TO
Lekoko Advisory Services is a dynamic black, femaleled, professional services firm specialising in forensic services. It assists clients with performing background searches through internetbased searches that are based on information sourced from various local and international databases, and verifications through educational institutions.
Boitumelo Lekoko
Managing Director: Lekoko
Advisory Services
Certified Fraud Examiner
Qualifications fraud has been a major problem in South Africa in recent times, and according to media reports, there is a growing number of high-profile people with falsified qualifications who hold positions in the public and private sectors.
This is largely due to inadequate or non-existent background checks and vetting procedures for both new and existing personnel.
Background checks serve as a proactive intervention that can be applied in identifying, reducing or mitigating fraud risk exposures in the recruitment and procurement processes.
There are instances where an employee is being promoted to a higher role and the qualifications they have subsequently obtained since being employed -which are part of the promotion role qualifying criteria - have not been verified, even though the employee’s initial qualifications may have been verified when they were first appointed.
Along with the growth of bogus online institutions, there is an unintended consequence as well: people fall victim to scams by institutions that are not accredited to issue certain qualifications.
Online distance learning, as well as short online courses have become a preference pre and post the Covid 19 pandemic. The need to enhance career prospects and to move up the ranks has increased the demand for quick and short online courses.
The fake online degrees or short programmes have unfortunate consequences for those who fall for the scams as well as for the recruiting organisation.
First and foremost, what is fraud and how does qualification fraud come about. Fraud and forgery fall under the common law offences in South Africa and are defined as:
• Fraud is the unlawful and intentional making of a misrepresentation which causes actual prejudice, or which is potentially prejudicial to another.
• Forgery consists of unlawfully and intentionally making a false document to the actual or potential prejudice of another.
Qualification fraud falls under occupational fraud. Occupational fraud is defined in the Occupational Fraud 2024: A Report to the Nations by the Association of Fraud Examiners (ACFE) as “The use of one’s occupation for personal >
enrichment through the deliberate misuse or misapplication of the employing organization’s resources or assets.”
Qualification fraud can also take place externally, whereby fraud is committed against an organisation by an external party, who ends up being appointed or contracted a result of forged qualifications.
Most sections of the National Qualifications Framework Amendment Act, 2019 came into force on 12 September 2023, according to a gazetted presidential proclamation. Among other things, the Act:
a. Provides for the referral of fraudulent qualifications to a relevant professional body
b. Introduces offences for qualification fraud, and
c. Empowers the South African Qualifications Authority (SAQA) to:
• formulate criteria for evaluating foreign qualifications
• evaluate foreign qualifications, and to
• establish and maintain registers for:
• professional designations, and
• misrepresented and fraudulent qualifications.
The Financial Intelligence Centre (FIC) issued a Directive 8 of 2023, which has made it mandatory for accountable institutions to screen prospective and current employees for, amongst others, competence and integrity, periodically, in a riskbased manner.
The verification of personal and confidential information should be in line with the Protection of Personal Information Act, which
requires the signed consent of the individual prior to the background checks being conducted.
The 2023 Background Screening Index Report issued by Managed Integrity Evaluation (Pty) Ltd (“MIE”), reflects that the MIE conducted over 3.2 million background checks transactions for companies throughout Southern Africa, marking a sharp increase from the previous year.
What is interesting in the report is that qualification verification is the most requested checks in Africa. The 2023 Background Screening Index Report provides the following insights regarding qualification verification:
According to Stats SA, the official unemployment rate stands at
32.9 %, with a 45,5% unemployment rate among young individuals (aged 15-34 years) in the first quarter of 2024.
South Africa is grappling with the highest unemployment rate, and the desperation for employment has contributed to a sharp increase in qualification fraud.
This in turn makes the job market highly competitive and increases the unemployability of individuals. The increase in qualification fraud can also be ascribed to the ease of obtaining fake qualifications across the board.
Generally, the explanation for why some individuals commit fraud is known as the Fraud Triangle, developed by Dr. Donald Cressey. According to the Fraud Triangle, individuals are motivated to commit fraud, when these three (3)
elements come together:
1. Pressure (such as financial or societal status pressure)
2. Opportunity (such as weakness in internal controls)
3. Rationalisation (justification for committing the fraud)
"The Fraud Diamond Theory" is viewed as an expanded version of the Fraud Triangle Theory - and was first presented by Wolfe and Hermanson in the CPA Journal . In this theory, an element named "Capability" (skills and ability to commit fraud) is added.
The impact of qualifications fraud on individuals is the risk of facing legal action, criminal charges and reputational damage.
The ripple effects on the integrity of the hiring process being undermined and reputational damage, suffered by the affected organization can be felt for long periods, not to mention the loss in productivity/poor performance caused by the incompetence of the individual with fraudulent/fake qualifications.
This list of “red flags” that could indicate qualifications fraud, is not exhaustive:
• Undue delays in conducting background searches for prospective employees/or being done long after the individual has been hired.
• Reluctance/unwillingness to provide auditors/HR with the supporting information for updated/recent academic achievements
• The language on the
certificates appearing poor and inconsistent
• The certificate has incomplete information
• The original certificate and material thereof, does not have temper proof and other antiforgery controls
The Occupational Fraud 2024: A Report to the Nations by the ACFE found that running background checks on potential employees as part of the hiring process serves as a fraud prevention mechanism.
• It is noted that 57% of the victim organisations that formed part of the study by the ACFE for the report, ran background checks on the perpetrators before hiring them.
• No red flags were found in 84% of situations where background checks were conducted.
• However, in 16% of the cases, the perpetrator had some prior activity that was discovered in the background check process.
Other prevention and detection mechanisms include:
• Embedding background checks in the HR and hiring policies
• Using an independent reputable service provider to conduct background checks
• Background checks on further qualifications for promotion or job changes.
• Training HR to recognise warning signs of qualification fraud
• Periodic internal audit reviews and verification on hiring requirements and qualifications.
From modest beginnings to prestigious academia, Dr Audrey Legodi shares with Sinazo Mondo how she overcame obstacles, changed lives and also became an esteemed auditing professional.
Auditing and accounting expert Dr Audrey Legodi thrives on improving the quality of education through teaching and mentorship initiatives.
The esteemed scholar finds fulfillment in her roles beyond auditing engagements. As a lecturer at the Tshwane University of Technology, she has influenced thousands of students, imparting knowledge and life skills that have helped shape their careers.
“I had an opportunity to impart knowledge and counsel to these beautiful souls. I have taught them life skills over and above auditing,” says Legodi.
“Many of them are employed now, so
they can put the knowledge they've gained to use.”
“But what is the most satisfying thing for me is when they tell me how I impacted their lives and bring up our conversations from when they were still students. I’m always there for my students as a lecturer, a mother and a mentor. I strongly believe in them.”
Legodi, who was born and bred in Dennilton in Limpopo, is currently a senior auditing lecturer and council
member, serving as the Chairperson of the Department of Auditing at the University of South Africa (Unisa) where she is inspiring and educating future auditors and accountants.
She is a Registered Government Auditor (RGA), a designation held by the Southern African Institute of Government Auditors (SAIGA) and has been a member of the professional body for more than four years.
A finance whizz, Legodi cut her teeth as an accounting trainee at PwC, one of the big four accounting firms in the world. She then joined several firms across the country where she gained vast experience.
Initially aspiring to be a psychiatrist, Legodi's interest in auditing emerged during her second year at university. Her recruitment by PwC provided her with a comprehensive understanding of the auditing profession, solidifying her career path.
It was at PwC where Legodi built a solid career foundation, developing a disciplined, ethical approach to work. Her career trajectory includes serving as the Chair of the Department of Auditing at Unisa, Chair of the Audit and Risk Committee, Chair of the Finance Committee, and Deputy council member in Higher Education institutions.
On her accomplishments in the field, Legodi says, “As much as I am capable of highlighting my accomplishments in a few audit engagements, I would prefer to emphasise my successes as a lecturer, chairperson of the Audit Committee, and Deputy Chairperson of Council. I believe that these roles are fulfilling and would encourage other auditors to consider the positions.”
Legodi specialises in internal and external audits as well as public sector governance, specifically concerning the functions of audit committees.
Her involvement in governance roles
“We don’t just end up writing recommendations to auditees in audit reports, but we have the power to influence the
implementation of auditors' recommendations.”
- Dr Audrey Legodi
allows her to influence policies and behaviours within organisations, ultimately improving service delivery to the public.
“Being involved in governance and holding positions like audit committees is another thing that auditors should aspire to. It offers us, as auditors, opportunities to influence policies and behaviour in an organisation,” Legodi explains.
“We don’t just end up writing recommendations to auditees in audit reports, but we have the power to influence the implementation of auditors' recommendations.
“Therefore, auditors should consider occupying such influential positions so that there can be a change in organisations which will eventually improve service delivery to the public.”
Corruption and the inability to detect fraud are also significant obstacles. Emerging trends like the Fourth Industrial Revolution (4IR), artificial intelligence (AI), and sustainability issues also present challenges that require auditors to continuously upskill and adapt. >
And how does Legodi do that?
“I attend training, seminars, and short courses to stay updated with emerging trends and best practices,” she says. “I also engage in research projects focusing on governance, anticorruption, and sustainability.”
Looking ahead, Dr. Legodi looks to enhance the value auditors bring to society and the environment. In the next five years, she aims to become a distinguished researcher with a significant impact on the auditing discipline.
Legodi's journey is a testament to resilience, dedication and a deep commitment to both her profession and her community.
To that end, she is committed to initiatives that improve education quality, sustain the environment, and eradicate poverty and corruption.
For Legodi, success is measured by the value she brings to auditees, society and the environment, and by transforming individuals' lives as a community leader.
“Learn continuously. Do not get weary of learning, Aspire to make a positive change through your work. Make a concerted effort to live in peace. Establish strong professional connections and networks. Exercise regularly and prioritise your physical health and self-care. Vitality is essential for executing your duties,” says Legodi, as she advises aspiring auditors to continuously learn and strive for positive change.
Given all this, one might wonder how Legodi manages to juggle her family and work. “Nope! "There’s no balance at all,” chuckles Legodi.
“I always encourage my family and those around me to always keep themselves busy, learn new skills and continuously develop themselves.”
Her 23-year journey in auditing hasn’t been without its share of challenges, the 47-year-old has suffered prejudice on the grounds of favouritism, race and gender. The outspoken Legodi emphasises the importance of building strong relationships with colleagues and stakeholders and of seeking religious guidance during difficult times.
Her success is deeply rooted in the values instilled by her parents, who taught her this importance of hard work, self-belief and Christian faith.
“I associate my hard work with my parents, who taught me to be a hard worker and believe in myself,” Legodi says. “Sundays were dedicated to church, which fostered my relationship with God.”
Legodi's academic journey began at the University of Pretoria, a decision influenced by her mother, also a teacher. Despite initial academic challenges, Legodi persevered and managed to pass her modules. The death of her father dealt her a blow, but grief pushed her to work harder.
“I didn’t know how to handle the loss and suffered academic setbacks. I felt that my father would be
disappointed with my results and the way I was handling his passing,” she says.
“I decided to rise again, and I was more focused and hard-working than I did in my first and second years.”
Legodi is also passionate about community building and invariably engages in activities such as career guidance and providing food and clothing to the destitute. She believes that auditors can foster community development and social impact by making recommendations that would ultimately benefit society and the environment, improving education through initiatives such as tutoring and mentorship.
Among the career guidance initiatives, she has been involved in community projects in Gauteng North district, Cosmo City, Lesedi High School, Cultura, Ekangala and KwaMhlanga.
Legodi's journey is a testament to resilience, dedication and a deep commitment to both her profession and her community. Her contributions continue to inspire and influence those around her.
In her free time, Legodi engages in community-building projects and enjoys watching reality TV shows, shopping, and dining. During holidays, she shifts her reading from academic articles to books on diverse topics, currently focusing on money, savings and investments.
Rakshika Danilala Director I Chief Executive Officer of AAA Consulting
For several years now, there has been much discussion over the topic of why clean audit outcomes does not necessarily lead to service delivery.
Reflecting on the audit outcomes of national, provincial and local government as reported in the consolidated general reports produced by the Auditor-General of South Africa (AGSA) over the last five years, there seems to be a slow but steady improvement in audit outcomes, yet we do not always see a correlation between these audit results and service delivery.
Simply put, a clean audit means that the financial statements and performance reports of government institutions give a transparent and credible account of their finances and performance on their service delivery targets.
It also means that the institutions have complied with key legislation that is applicable to them and where it was transgressed, it is not material or rare.
A clean audit therefore means that these accountability reports present a reliable picture of an institution’s performance – whether good or bad. >
Based on this, a clean audit is therefore not always an indicator of good service delivery. However, where institutionalised controls and systems to plan, measure, monitor and account for the finances and performance of institutions are in place and rules are adhered to, when combined, will provide for a solid foundation for improved service delivery.
The “Accountability Ecosystem” referred to in the AGSA’s consolidated general reports further points out that everyone has a role to play in improving the lived experience of citizens.
Improving citizens’ daily experiences is not solely the duty of governmental institutions. No matter what position we have in society - as citizens, auditors, or those carrying out governmental duties - we are all accountable for this duty. But a lot of us decide against accepting this duty since, if we do, it also entails accountability, which makes it harder to apportion blame when anything goes wrong.
However, it also means that when something goes wrong, they must also bear responsibility for too, assuming such a heavy responsibility is no easy feat because it is easier to play the “blame game” when things go wrong.
However, adopting such an attitude is far removed from the vision of the National Development Plan that explicitly states that “South Africa belongs to all its people and the future of our country is our collective future. Making it work is our collective responsibility.”
Over the years, government institutions have taken several actions to address the glaring
challenges facing service delivery. These actions are informed mostly by audit, oversight and other accountability reports. Yet somehow these actions do not seem to yield wide scale changes that many yearn to see.
A clean audit means that the accountability reports present a reliable picture of an institution’s performance – whether good or bad.
To begin the journey of change, here are few reflections for consideration regarding the roles played by citizens, auditors and public servant, including consultants as well as those charged with governance and oversight.
• As a taxpaying citizen, what do you do to hold our government accountable for the responsible use of your hard-earned money and the delivery of key basic services to which you are entitled?
Simple action like exercising your right to vote in the government elections, joining civil society organisations or participating in consultations by your municipality on the Integrated Development Plan that essentially sets out the budget and related service delivery priorities in your community are just some examples of what you can do to play an active role in holding government accountable.
• In the National Framework Towards the Professionalisation
of the Public Sector, dated October 2022, the following is included in the Statement of support from the President of the country; “Building an efficient, capable and ethical state free from corruption was among my foremost priorities. Only a capable, efficient, ethical and development-oriented state can deliver on the commitment to improve the lives of the people of this country. This means that the public service must be staffed by men and women who are professional, skilled, selfless and honest. They must be committed to upholding the values of the Constitution of the Republic of South Africa of 1996… and must “faithfully serve no other cause than that of the public”.
The important and critical role played by public servants in serving the people of South Africa and responding to their needs is noticeably clear, irrespective of the position they hold.
Having a shared purpose is what enables successful implementation of strategy and key priorities of each government institution that ultimately leads to fulfilling the goals and ambitions of the country as articulated in the National Development Plan 2030.
Collaboration and integration are equally essential to ensure that services are delivered not only in accordance with the relevant legislation, policies and procedures but also efficiently, effectively, and at the right price and quality.
Whether in public or private sector, collaboration and integration is key. An example of where a glaring gap exists, is between those
responsible for managing and reporting on the finances of an institution and those responsible for planning, budgeting, implementing and reporting on the performance against pre-determined objectives.
These remain separate functions usually operating in isolation, yet these pre-determined objectives are linked to services that each government institution is mandated to deliver on.
One needs to consider why this is so and how the gap can be bridged. It is also worth considering other gaps that exist in the processes of planning, budgeting, implementation, monitoring and reporting.
Recommendations made by various governance structures such as audit committees and oversight and parliamentary committees are also crucial in addressing gaps. Therefore, one must embrace them as opposed to seeing them as hindrances in the role public servant plays. These opportunities for collaboration and integration are key for improved service delivery.
The consolidated general reports produced by the Auditor-General on the audit outcomes of local government shows that year on year, municipalities spend billions of
rands on the use of consultants.
The lack of the necessary skills and capacities within the current municipal workforce is one of the primary causes of the heavy reliance on consultants.
This clearly demonstrates flaws in the recruitment processes. However, rather than looking on what was done incorrectly, the focus should be towards finding solutions to address the existing problem of capacity and skills.
The lack of the necessary skills and capacities within the current municipal workforce is one of the primary causes of the heavy reliance on consultants.
• Do you ensure that the solutions provided are sustainable?
• Do you ensure that there is a transfer of skills?
• Do you have capacity to deliver on the work you are taking on to ensure it is done properly?
• Are you offering the best service at the best price?
For external or internal auditors or those holding positions in governance or oversight structures, it is important to remember the influential role you play in terms of holding government institutions accountable.
If your recommendations are not being implemented, here are a few questions to consider:
• Do you fully understand the environment and nature of the work done by the institutions you serve?
• Are your recommendations general or do they consider the underlying cause of the issues as identified?
• Are your recommendations clear and practical from an implementation perspective?
• What can you do to ensure recommendations are implemented, knowing that if implemented, they can work?
There is a role for everyone to play and change the trajectory to ensure that clean audits do translate into service delivery.
*Rakshika Danilala is also the Chief Executive Officer of GPA Academy and the Acting Chief Impact Officer of GPA Group*
Following the postpandemic cyclical recovery in 2022, geopolitical tensions exacerbated inflationary pressures and ushered in the highest interest rates since the Global Financial Crisis. This was a global theme, and the impact continues reverberating across
market projections, risk-taking, and asset repricing.
Higher interest rates in risk-free markets
While expectations of stable growth and slower inflation have prevailed, the year started with
optimistic expectations of sizeable interest rate cuts in countries such as the United States (US), where up to seven 25 basis points (bps) cuts were anticipated, which have proven unfounded.
Instead, the US experienced relatively resilient growth supported by savings buffers,
capacity growth, and looser fiscal policy. As a result, inflation has proven to be much stickier than hoped and the Fed expects only one 25bps cut this year, while market expectations have been scaled down to just two.
The European Central Bank has already delivered one 25bps cut in June, but sticky inflation will likely keep rates at current levels for the remainder of the year. The Bank of England is expected to slash rates next month, while the Bank of Japan is in the process of normalising monetary policy after an era of stimulus.
Following the postpandemic recovery, geopolitical tensions exacerbated inflation and ushered in the highest interest rates since the Global Financial Crisis.
Following the lifting of lockdowns last year, China’s recovery has been laggard. Property market woes and broader confidence weakness have dampened activity and inflation. Furthermore, renewed trade restrictions on Chinese goods, including electric vehicles, could weaken export gains.
As a result, commodity price growth has been weak relative to the post-pandemic upswing and has had implications for the export earnings of many industrial commodity-exporting countries, including South Africa (SA).
However, had it not been for China’s speedy uptake of green transport and generally weak demand, oil prices could have been higher – exacerbating the impact
of ongoing geopolitical tensions in Russia and the Middle East. Oil prices have been just above $80 per barrel on average year-to-date, and are expected to remain range bound, falling below $80 in 1H25.
The outlook is stable but risks abound
This will be supportive of falling global inflation. According to the IMF, global inflation should slow from 5.9% this year to 4.4% next year, and lower interest rates. Global growth should be stable at 3.2% this year, rising slightly to 3.3% in 2025, highlighting a combination of easier yet restrictive monetary policy, stillloose fiscal policy, and ongoing structural reforms in emerging markets.
Risks to the outlook include adverse weather conditions, heightened geopolitical tensions, and a shift to populist or nationalist economic policy, with over half of the world’s population and GDP voting this year. These catalysts could drive further fragmentation and social instability.
The structural reform process in emerging markets extends beyond addressing infrastructure issues, expanding capacity, and lifting productivity. It also requires financial market recalibration as a period of restrictive monetary policy has raised debt vulnerabilities. Fortunately, cooperation has allowed defaulting countries, such as Ghana and Zambia, to finalise debt-restructuring with both domestic and external creditors and a period of fiscal consolidation should follow.
Other countries, such as Nigeria, are working on liberalising foreign exchange markets and
strengthening monetary policy transmission, while others, such as Namibia and Mozambique, have considerable energy investments in the pipeline.
Therefore, while exposure to climate change, higher debt-service costs, weaker commodity price growth, and political instability remain meaningful, broader macroeconomic rebalancing is a feature of the outlook.
The same applies to SA where energy shortages peaked in 2023. The country experienced no loadshedding over 2Q24 and into 3Q24 - importantly, over the winter months.
The maintenance of Eskom’s power plants and private sector investment in renewable energy should ensure the stability of the energy supply going forward. Furthermore, the liberalisation of ports and rail infrastructure should gradually support growth over the forecast horizon.
In the meantime, political uncertainty ahead of the elections kept confidence subdued –weighing on both investments and demand. Combined with weak external activity, manufacturing and mining output dragged GDP growth in 1Q24 and looks likely to detract from growth again in 2Q24.
Sectors that rely on consumer spending have also revealed strains, as the high cost of living has constrained retail sales growth and the real estate market. However, there are meaningful disparities across consumer segments, with lower-income consumers being more vulnerable to financial stress.
Socioeconomic issues require urgent attention
The post-election democratic >
processes have progressed relatively smoothly, with Cyril Ramaphosa inaugurated as President of the seventh administration and subsequently announcing the Cabinet.
The previous administration made meaningful, yet incremental, progress in executing key reforms in energy, transport logistics, water, digital communications, and visas. However, the seventh administration faces the significant task of not just accelerating reforms but doing it in a way that promotes sustainable and inclusive growth as well as job creation.
SA’s official unemployment rate remains structurally high by global standards.
Currently, at 32.9%, the unemployment rate has increased from below 20% in the early 1990s.
SA’s official unemployment rate remains structurally high by global standards. Currently, at 32.9%, the unemployment rate has increased from below 20% in the early 1990s. The youth (ages 15-24) face particularly tough economic and labour market conditions, with their unemployment rate estimated at 59.7% and those aged 25-34 experienced an unemployment rate of 40.7%.
SA’s working-age population is estimated to be around 41 million, yet employment is only about 40% of this figure. This paints a dire situation that needs urgent attention.
Furthermore, inequality levels remain astonishingly high.
Measured by the Gini coefficient, SA’s income inequality is estimated at between 0.63 to 0.67, significantly higher than its
emerging market peers where the average Gini coefficient is below 0.5.
This shows that, since the democratic transition in 1994, the structure of the SA economy is still characterised by unsustainably vast income inequalities. The decline in GDP per capita over the past decade is particularly worrying and underscores that the economic pie is not expanding enough to cater to the population.
Despite the government’s efforts to reduce income inequality through progressive fiscal redistribution and other measures such as targeted social transfers, the elevated levels of inequality require concrete and sustainable interventions to boost long-term private sector fixed investment, economic growth, and job creation. Time is of the essence, and recent
changes in the political landscape suggest that these socioeconomic ills are unsustainable and require urgent attention.
That said, the financial market’s reaction to the Government of National Unity has been broadly positive. Participation in equities and bonds has improved, bond yields are lower, and the rand has recovered some value. Despite its traditional volatility, a lower political risk premium and sound macroeconomic policy should support further strengthening of the rand and slower inflation.
Consumer inflation has remained above 5% in the first five months of 2024, reflecting slowing goods inflation, including food, and
normalising services inflation. Interestingly, comparing consumer goods and consumer-related producer inflation indicates that retail margins may be improving. Alongside other expectations of improving operating conditions, this should support higher confidence and investment.
Interest rates should become less restrictive
Fortunately, and like the global picture, growth and inflation projections have held up well. Growth is anticipated to average around 1% this year before rising in 2025. At FNB, we expect 0.9% and 1.6%, respectively, and inflation is expected to average 5.0% this year, before falling to 4.7% next year. In line with this, the South African Reserve Bank (SARB) should initiate a cutting
cycle before year-end. The major cause for higher interest rates this year relative to earlier expectations is stickier global inflation and persistent upside inflation risks, mainly driven by geopolitical tensions and climate change.
As a result, the consensus expectation has removed at least one cut from the end-2024 level. Importantly, moves by the Fed and risk sentiment ahead of the US elections will continue to have a bearing on near-term expectations, and have motivated our call on the first cut to be pushed out from July to November.
The outlook over the medium term is where our predictions have fundamentally changed. The SARB has communicated its pursuit of a lower inflation target, one that would be more competitive
with structural inflation in peer economies. That target looks more like 3%, the lower end of the inflation target. While the SARB will still battle with elevated administered price inflation, its credibility and moral suasion should make the process easier, as it did in 2017/18 when the de facto target was lowered from 6% to 4.5%.
Therefore, we have provisioned for a 50bps risk premium on the repo rate over the forecast. Ultimately, interest rates should remain above pre-pandemic levels, in line with more adverse global risk sentiment and higher rates in risk-free markets. Over the longer term, a lower inflation target would result in a lower sovereign risk premium, less trend depreciation in the rand, and softer equilibrium interest rates.
Vuyokazi Mofokeng
University of Cape Town, College of Accounting
South Africa is grappling with high unemployment.
The youth unemployment rate at the end of 2023 was at a staggering 50.47% (Statista, 2024). On the global stage, South Africa ranked second out of 178 countries in terms of youth unemployment (The Global Economy, 2023).
This crisis spares no one; many young people, graduates and nongraduates alike, are jobless.
As a university student studying to become a Chartered Accountant, I was promised that further education would guarantee a better future and
higher chances of employment. However, the prospect of facing unemployment even after graduation is daunting. Graduate unemployment has almost doubled from 5.8% in 2008 to nearly 12% in 2023 (MacGinty, 2024). Given this context, auditors might be tempted to act unethically.
For example, a junior auditor seeking a job might embellish their experience or competence to secure employment. Despite knowing their limitations, they might choose not to disclose them, an act which directly contravenes the Code of Professional Conduct (CPC) for CA(SA)s.
The CPC emphasises Professional Competence and Due Care, requiring professional accountants not to undertake tasks they are not
competent to perform. Auditing can be a daunting profession, particularly forensic auditing.
“If people see that the ramifications of fraud are huge, they may be less willing to abandon their ethics and be involved in fraudulent activities.”
Forensic auditors examine financial records to uncover criminal activities, which can be used as evidence in court. This puts them at risk from criminals who may resort to extreme measures to evade justice.
The murder of Lawrence Moepi, a forensic director at PricewaterhouseCoopers (PWC), in a suspected “hit” in 2013, highlights
the dangers auditors face (News24, 2013). Under such threats, auditors might compromise their ethics, giving in to demands out of fear for their lives.
An auditor could be coerced to overlook irregularities or provide an inappropriately favourable audit opinion. Fearing for their life, they may compromise their ethics, and agree to the demands of the browbeater. Is there room for ethics if one’s life is under threat?
Corruption in South Africa is rampant, permeating nearly every industry and sector. Despite this, perpetrators rarely receive fitting punishments, which might encourage professional accountants to abandon their ethical duties, thinking they too can escape justice. The widely publicised Steinhoff scandal is one such example, where the company collapsed due to allegations of fraud and corruption, euphemistically termed “accounting irregularities.”
It took seven years for then-CEO Markus Jooste to face any form of prosecution, needless to say, he ultimately died by suicide before being fully held accountable.
Another example is the Tongaat Hulett scandal, which implicated lead auditor Gavin Kruger of Deloitte. This is yet another instance of the accounting and auditing profession's ethics being compromised. In this scandal, 6 TH executives and Kruger made billion-of-rand accounting errors on several accounts.
Kruger was the person responsible for uncovering material misstatements. He did not fulfil his professional obligation and ultimately signed off on the financial statements. Despite what some categorise as gross negligence, Kruger came out unscathed. Deloitte even defended Kruger by stating that it hadn’t seen any
evidence to support the criminal charges brought against Kruger. (Gernetzky; 2023). Such cases might suggest to aspiring auditors that unethical behaviour goes unpunished, fostering a culture of impunity.
Artificial Intelligence (AI) has been growing rapidly across many industries. Although AI has many applications, one cannot completely rely on it when it comes to auditing ethics. While AI may offer benefits in auditing, it has limitations that could hinder the process of ethics being addressed. The limitations include, but are not limited to:
• A lack of human judgement: AI struggles with complex ethical dilemmas as those issues require nuanced human judgement and understanding of context. Additionally, AI cannot distinguish between misstatements due to error or misstatements due to fraud. A human auditor would have to investigate further and make a judgement call.
• Incapability to identify irregularities if historical data also contains irregularities: AI can compare current data to historical trends and find irregularities. However, if the historical data also contains irregularities, AI would not be able to pick up those irregularities as the biased/ corrupt data would be seen as the norm/ the historical data.
The problem is complex as has been highlighted. So, what is the solution?
Corruption is an ecosystem, for it to thrive, multiple people must be
involved. If one corrupt person is removed, five more remain in the system. The issue would have to be tackled from the root. It starts with small steps.
For example, in the Governance Auditing and Assurance (GAA) course, emphasis is placed on ethics. In GAA 1, the emphasis is on King IV which addresses ethics. In GAA 2, not less than three weeks were spent discussing ethics, mainly on how auditors should conduct themselves ethically. The same is true for GAA 3.
Teaching students about ethics and governance is not the only solution, but it is a good start. Another solution could be more effective law enforcement. If people see that the ramifications of fraud are huge, they may be less willing to abandon their ethics and be involved in fraudulent activities.
Additionally, the noble act of whistleblowing could be destigmatised, and more safeguards can be put in place to protect those who come forward to report corruption.
It is hoped that as the new generations of accounting professionals enter the field, there will be improvements in how corruption and governing ethics are handled. A South Africa with reduced corruption is a South Africa capable of thriving. It is a South Africa that many students want to be part of.
A more open and equitable society can be promoted by tackling ethical concerns in auditing and ensuring that aspiring auditors fulfil their ethical obligations.
Students and future professionals must commit to maintaining the highest ethical standards, even in the face of adversity. Only then can we hope to build a better, more ethical future for our country.
Anna-Maria van Niekerk Bhekisisa news editor
TheANChaskeptthehealthministerportfolio inthegovernmentofnationalunity(GNU), withAaronMotsoaledi,whoalsoheadedthe departmentfrom2009to2019,becomingSouth Africa’snewhealthministerandJoePhaahla, theformeradministration’shealthminister, beingdemotedtothedeputyposition.
“Thedepartmentbelievesthereturnofboth politicalprincipalswillensurecontinuity andstabilityintheimplementationofkey healthprioritieswhichincludeincreasing lifeexpectancy,strengtheninghealthsystemeffectivenessandtheNationalHealth Insurance[scheme]toenablethecountryto attainuniversalhealthcoverage,”thehealth departmentreactedtotheannouncement.
Only four of the 11 parties that are part of South Africa’s government of national unity - the ANC, GOOD, PAC and Al Jama-ah - outright support the country’s National Health Insurance (NHI) Act as the route to get to universal access to healthcare.
Universal access to healthcare means providing the same healthcare to everyone in the country, regardless of their socio-econonic status, or whether someone can pay for it.
By 30 June, 11 parties have joined the ANC in the new GNU:
• Democratic Alliance (DA, 14 June),
• Inkatha Freedom Party (IFP, 15 June),
• GOOD (14 June),
• Patriotic Alliance (PA, 14 June),
• Pan Africanist Congress of Azania (PAC, 18 June),
• Freedom Front Plus (FF+, 20 June),
• United Democratic Front (UDM, 21 June),
• Rise Mzansi (21 June),
• Al Jama-ah (22 June),
• United Africans Transformation (UAT, by 30 June).
Together these 11 represent 288 seats - that is, 72% - in the National Assembly.
With so much opposition to the NHI within government, the implementation of the scheme is likely to get even trickier than what it already is.
President Ramaphosa’s signing the NHI Bill into law on 15 May, just two weeks before the general elections, was met with, to say the least, mixed reactions.
Before the elections, the DA, for one, wanted the NHI Act to be dropped and told its voters the party had its own plan for how to get to universal health coverage. The IFP voted against the NHI Bill in Parliament and the UDM says on its website that “the danger with a national health insurance is that this will be maladministered”. GOOD doesn’t directly refer to the NHI in its election manifesto, but the party did vote for the Bill in the National Assembly. The PAC also voted for the NHI.
The FF+ is completely against the NHI. “If voted into power, the FF Plus plans to scrap the National Health Insurance (NHI) Bill”, the party said in its elections manifesto; the FF+ also has a view on transformation that directly opposes the ANC’s and that of many parties in the GNU: the FF+ says it will prioritise expertise over transformation to improve the quality of healthcare.
The NHI is only one plan to get universal access to healthcare; many other countries use different strategies. “NHI is a form of universal healthcare, but there are different models,” says Hassan Mahomed, a health systems expert from Stellenbosch University’s division of health systems and public health.
The DA is strongly pushed for the health minister portfolio, and had the ANC granted it its wish, it was
going to be headed up by a party who has expressed its outright opposition of the NHI.
“How - or if - the NHI Act is implemented is now the issue”, says Pamela Saxby, founder of Policy Watch SA, an organisation that helps businesses and their legal advisers make sense of the law-making process in South Africa.
“There’s still a very long way to go,” says Saxby. “We only have a framework agreement [for the GNU] in place [at the moment]. Who will influence [the future of the NHI] the most? These things still must be thrashed out,” she says.
President Cyril Ramaphosa’s signing the NHI Bill into law on 15 May, just two weeks before the general elections, was met with, to say the least, mixed reactions.
Putting his signature on the Bill meant that he gave the presidential go-ahead for it to be law, which could be officially published as an Act in the Government Gazette the next day.
“It was important to fulfil a promise made long before the elections,” says Saxby. But, she explains, signing a Bill into law without making it implementable “simply means it joins the statute books”.
“Speed is not a word that I will apply to the NHI. Even if the ANC had obtained a majority, it was going to take time - 15 to 30 years analysts suggest - to implement the NHI. It’s going to be a slow process,” says Mahomed.
But, he says, at the moment there’s “a lot of anxiety and panic around the NHI” - and that’s why we asked a few experts to explain what comes next.
1. The NHI Act has been signed into law. Is it ready to be rolled out?
“No, not yet. The NHI Act as it’s been published now is more like a >
The NHI Bill seeks to provide universal access to health care services in the country in accordance with the National Health Insurance White Paper and the Constitution of South Africa.
rough outline than a final picture, and will need both further legislation and regulations so that it can operate - that’s why the president has not yet announced when it will come into effect (or he withheld the date of commencement),” says Ben Cronin, a law lecturer at the University of Cape Town and former state law advisor in the Western Cape.
Before the Act, or any part of it, can
be rolled out, Parliament will need to enact further legislation (including ones providing for its funding) and the necessary regulations - that is, the rules that make the law enforceable - have to be written. “Regulations determine the detail of how the final picture will look; it’s like adding colour and shading,” he explains.
It’s a long process to get to that point, adds Saxby - especially
for a piece of legislation that is so intricate and touches on or is affected by many other laws.
“Once regulations for an Act - or a part of it - have been drafted, they are submitted to the department’s minister.
If approved, the minister will, in a series of steps, present them to the Cabinet, after which they’re published in the Government Gazette so that the public can
give their input. A period of 30–90 days is usually allowed for public comment and based on this input, the regulations can be revised and then again have to go through the approval process in Cabinet.”
Only once the regulations (or the part for which they were written) are final is the law ready to be promulgated, which means that the president’s formal
announcement can be published in the Government Gazette.
2. Can the Act be overturned?
Cronin says, “the process for repealing an Act is not different from that of passing a new one — it will just require an ordinary majority on the day of the vote in Parliament”.
But he adds that opponents of the NHI Act might not need to fully repeal it to achieve their goals.
Parliament could thwart the NHI Fund by simply withholding the next pieces of legislation that will be needed to make the NHI work (like Bills introduced by the minister of finance to allocate money to the Fund), he says.
This would “effectively scupper” the NHI Fund and make it a “car without an engine”
To make any changes to the Act — officially called amendments — the usual law-making process will have to be followed, explains Sasha Stevenson, executive director of the human rights law centre, Section 27.
This means the health department will have to table an amendment Bill in Parliament, where it will again be debated, followed by input from the public. Only then can there be a decision as to whether the change is accepted or dropped.
Although regulations are easier to change than an Act itself, “you can’t fix a law through regulations,” she says.
3. How would the Act go forward, if at all?
Rolling out the NHI will be a gradual process. At the signing at the Union Buildings last month, Nicholas Crisp, NHI deputy director general in the national health department, told Bhekisisa that once the regulations for a section or clause are ready, the minister can propose by when that part of the Act should be promulgated — that is, >
publicly announced, by publication in the Government Gazette, that it’s ready to be put into effect — but the president decides on the specific date.
Crisp says because there’s no board or fund for the NHI yet, it’s impractical to bring the entire Act into effect simultaneously. However, its wording does allow for staggered roll-out dates, with an initial phase of four years (from 2023 to 2026) to set up a board and its administration.
Heads for four of the five chief directorates for the NHI’s branch within the health department - health product procurement; digital systems; service provider management; and healthcare benefits and provider payment design - were appointed in 2023. The chief director for risk identification and fraud prevention still needs to be appointed.
At the signing in May, (then) Health Minister Joe Phaahla said the health department was already preparing regulations for the NHI Fund and its structures.
The first thing that needs to happen for the NHI to get off the ground, is that a board has to be appointed (once the regulations for this are ready), Crisp told Bhekisisa.
The board will, in turn, be able to appoint a CEO for the Fund, and the board and the minister will set up technical committees to help with specialised knowledge. An important one would be the benefits committee, which will work out what services the NHI will cover, explains Mahomed.
“NHI-funded healthcare may be available if we have the flu or pneumonia, or our children need immunisation, but what if I’ve got a rare form of cancer? Will the NHI pay for that? This benefits committee work is crucial in guiding the actual financial structure of the Fund.”
Working out the prices for treatment - and what service providers like general practitioners, physiotherapists, dentists and
pharmacists who will form socalled contracting units for primary healthcare, will be paid - will require another committee. Mahomed explains that each province has had pilot sites to test out how the contracts should work.
Rolling out the NHI will take many years, experts have said. Two phases for getting the NHI off the ground are described in the Act. The first will run from 2023 to 2026, to set up the administration of the Fund and shift the control of central hospitals from the provinces to the national health department.
“That’s also a bone of contention,” notes Mahomed, “because the national department has never managed services directly. But that’s one of the goals for the first phase.”
The second phase - from 2026 to 2028 - is about “actually putting in place the building blocks for the NHI to function”, he explains - things like setting up contracting units and how hospital services and emergency services will be funded by the NHI.
While the exact timeline for rolling out regulations is not fixed because of political, economic and administrative issues, experts say strengthening the health system has to start now “rather than waiting for NHI to solve all problems”.
*This article first appeared in Bhekisisa. The Bhekisisa Centre for Health Journalism is an independent media organisation that specialises in narrative, solutions journalism focusing on health and social justice issues across Africa* https://bhekisisa.org/ Sign up for the newsletter.
Richard Chambers CIA, CFE, CGFM, QIAL, CRMA, CGAP Founder and Chief Executive of Richard F. Chambers and Associates, LLC
From my experience in traveling around the world, awareness about what internal auditors do is not binary; it falls along a continuum. Some noninternal auditors are very familiar with our profession and how we
value, while others are clueless. The most common response I still receive after almost 50 years in the profession is: “Oh, you guys do taxes - right?”
My unscientific research leads me to believe many people have a vague notion of what we do. In other words, they possess limited awareness about internal auditing. A few years ago, I authored a blog titled “Five Myths That Cloud Awareness About Internal Audit.” Even with our more
enlightened approach to setting aside a month to celebrate our success, we must acknowledge the myths that must be overcome.
Myths can tell us a lot about ourselves - or, at least, about how others see the world.
But at times it seems that the most inaccurate myths are the most difficult to dispel, particularly if there is a grain of truth buried in the origins of the myth.
I first joined the profession in 1975, and even then, I found myself fighting to set the record straight when someone confronted me with a myth about my newly chosen profession. I often smile at how many of those myths are present after all these years. And, while each of the following myths is generally untrue, the fact that they are so enduring might be an indicator that each of us needs to take stock of how we might inadvertently foster their perception. Do we do things to reinforce these myths? Or do we need to do a better job of helping people understand what we really do and how we add value in the 21st century? You be the judge.
Myth 1: Internal auditors are “bean counters” just like the accountants.
One of the most common misconceptions about internal auditing is that the auditors are “bean counters” who focus solely on their companies’ financial records.
There is an obvious grain of truth in this myth: A solid audit or accounting background can be helpful for a career in internal audit. But The IIA’s “2024 North American Pulse of Internal Audit Report” released in March found only 22% of internal audit’s resources were focused on financial-related risks.
Instead, internal auditors are more likely to focus on fraud risks, compliance issues, and myriad operational issues that are unrelated to accounting, and the auditor’s background is likely to be as diverse as the operations they audit. An accounting degree is not the only path for career success, and these days it’s not even >
the most common path: Recent surveys have revealed that audit executives are now recruiting job applicants with analytical/ critical thinking ability, data-mining skills, business acumen, and IT skills more often than they seek applicants with accounting training.
One of the most common misconceptions about internal auditing is that the auditors are “bean counters” who focus solely on their companies’ financial records.
Myth 2: Auditors cannot succeed unless those they audit fai l.
At the heart of several jokes about internal auditors is the misconception that we will leave no audit empty handed. Some believe we are dead set on picking apart processes and ruining the reputations of the people who do the “real work” just to get our findings. According to this myth,
the auditors are viewed as the group who “bayonets the wounded after the battle is over,” distracting management from more important responsibilities.
In reality, of course, internal audit’s focus is on major risks rather than on nit-picking details. Internal audit resources are limited, and when auditors focus too much attention on minor issues just to harvest “low hanging fruit findings,” they are limiting the time available for addressing the major risks and controls that are at the heart of internal audit. A good internal auditor would rather report on a $6 million cost savings than on a $6 error – even if the $6 error might sound more sensational!
Myth 3: It’s best not to tell the auditors anything unless they specifically ask.
This myth can be damaging, so it is unfortunate the advice has made its way into more than one “How to Survive an Audit” article. Audit clients are sometimes given this advice by well-meaning friends, but
it results in less efficient audits and wastes everyone’s time.
If internal auditors believe their clients are purposefully hiding information, whether by omission or commission, they normally will increase the scope of the audit to determine whether other important information has gone unreported. The purpose of internal auditing is to add value and improve an organization’s operations, and hiding information is against everyone’s best interests.
Myth 4: Internal auditors follow a cycle in selecting their audit “targets” and use standard checklists so they can audit the same things the same way each time
This myth is less true with each passing year. Our professional standards require risk-based plans to determine our priorities, both in developing internal audit plans and schedules and in planning individual audits.
Obviously, some risks justify repeat audits on a regular basis, and there are some types of audits - for example, certain compliance reviews required by regulators - where audit programs and checklists are unlikely to see major changes from year to year. But, in general, internal auditing has become a dynamic profession that must change any time an organization’s risks change.
Myth 5: Internal audit is the corporate “police function.” As Lord Justice Topes once said, “The auditor is a watchdog and not
a bloodhound.” In my experience, the best internal auditors are almost always those who create a rapport with their clients. When internal auditors’ behaviour is accusing or aggressive, they are far more likely to be met with resistance than when they treat findings as an opportunity to help accomplish objectives and facilitate improvement.
Changing perceptions takes time, and it often requires the combined efforts of many individuals to break down a stereotype.
Breaking down this stereotype is so important that most internal audit groups actively encourage clients to think of internal audit as a coach, not a cop. As I wrote in 2022, it’s long past the time when internal auditors should put away their radar guns, and focus on traffic safety.
Each of these myths was closer to reality in the 20th century than today. It’s easy to think of afew specific examples where an action that reinforces these stereotypes might be justified, but unfortunately, there are too many cases in which internal auditors are needlessly perpetuating the myths.
Are any of the classic myths true about you or your internal audit function? If so, it might be time to take a good look at what you are trying to accomplish and how you plan to reach your goals.
Changing perceptions takes time, and it often requires the combined efforts of many individuals to break down a stereotype. Our profession’s image is rapidly improving, but more work is needed to enhance our stakeholders’ understanding of the profession.
Each of us can help to eliminate these myths and misconceptions - whether through small steps, such as passing along pertinent news to clients, or through larger contributions, such as sharing audit knowledge at a seminar or conference.
Each internal audit function is unique, and your perspective might be different from mine. Has your internal audit department recently made real progress in dispelling any of these myths?
*Richard Chambers has served as the president and CEO of The Institute of Internal Auditors (IIA), the global professional association and standard-setting body for internal auditors. Chambers has more than four decades of experience serving in and on behalf of the internal audit profession* (C) 2024. Richard F Chambers and Associates, LLC (USA). Reprinted with permission.
Patrick (Lonwabo Mepeni) Kulati CEO of Good Governance Africa
Effective governance, infrastructure improvement, and human capital development are crucial for democracies like Nigeria and South Africa to meet the needs of their citizens. Without these elements, democracy fails to improve lives, leading to social discontent and instability.
The interplay between democratic institutions and development is a pressing issue that both countries must address to avoid the pitfalls of unfulfilled promises and stagnant growth.
On May 29, 1999, Nigeria returned to democratic rule, marking a radical departure from military governance. This shift was a beacon of hope for many Nigerians who expected democracy to bring about substantial socio-economic changes.
Patrick Lonwabo Kulati has a strong history of leading international NGOs and drivingorganisational growth, effectiveness andprofitability. Kulati is also a published author of "A Gap in the Cloud," providing valuable insights and inspiration on personal and leadership resilience. He holds a Master’s degree in Public Administration from the University of Stellenbosch
However, Omano Edigheji, in his book "Nigeria, Democracy without Development: How to Fix It," stresses that democracy must deliver socio-economic benefits to avoid social and political instability. He argues that “a democracy that is not able to deliver socio-economic benefits will end up in social and political instability… Democracy, simply put, means development. So that a country in which people go hungry is not a democracy” (2020:16).
Edigheji's insights underscore a significant issue: the gap between democratic ideals and the harsh realities of everyday life in Nigeria. Despite the return to civilian rule after Sani Abacha’s death in 1998, Nigeria has struggled with issues like corruption, inadequate infrastructure, and limited economic opportunities. >
Kidnappings and illegal roadblocks have also risen substantially in the last decade. These challenges have hindered the country's progress and left many Nigerians disillusioned with the democratic process.
Similarly, on May 29, 2024, South Africa’s elected leadership faced a pivotal opportunity to break away from corruption and reestablish clean governance. The goal is to ensure that democracy delivers developmental dividends for its downtrodden people.
Despite the political rights, civil liberties, and human rights that democracy has provided, the deficits - poverty, crime, and underdevelopment - have overshadowed these benefits.
South Africa's post-apartheid journey has been marked by significant achievements and substantial challenges. While the country has made strides in establishing a democratic framework and promoting political freedoms, it has struggled to translate these gains into tangible improvements in living standards for its citizens. The persistence of high unemployment rates, widespread poverty, and systemic
corruption has undermined public trust in democratic institutions.
In her study, ‘Making Democratic Governance Work: The Consequences for Prosperity’, Harvard Scholar Pippa Norris found that development goals are most often achieved where democratic institutions strengthen voice and accountability and where governance capacity is robust enough to manage the supply of public goods and services effectively. This insight highlights the importance of building strong institutions that can deliver on their promises and respond to the needs of the populace.
While democratic electoral processes are crucial for empowering people by giving them a voice, for many South Africans, joblessness and abject poverty remain the reality despite having voted since 1994. Service delivery protests disrupt economic activities, highlighting weak governance that fails to provide the public goods and services guaranteed by the constitution.
The Afrobarometer Network Policy Paper No. 85, "Africans Want More Democracy, But Their Leaders
Still Aren’t Listening," states that “democracy is losing ground in Africa.” This dissatisfaction stems from widespread and worsening corruption, leaving people disillusioned with political systems that have yet to fulfil their aspirations for democratic and accountable governance.
The decline in trust towards democratic institutions is not unique to South Africa or Nigeria. Across the continent, citizens express frustration over unfulfilled promises and a lack of substantive progress. This erosion of trust can lead to political apathy, social unrest, and a questioning of the democratic system itself.
The United Nations and International IDEA's discussion paper, ‘Democracy and Development: The Role of the UN’, asserts that the lack of development - manifested in economic stagnation, persistent inequalities, and deep poverty - can erode faith in democratic systems, even in regions where these systems were previously well-established. Formal democratic processes alone, such as regular elections, are insufficient toimprove the lives of the poor.
This symbiotic relationship between democracy and development means that one cannot thrive without the other. Effective democratic governance should facilitate development, and sustainable development should reinforce democratic values. Without this interdependence, both democracy and development risk being undermined.
The experiences of leaders like Cyril Ramaphosa in South Africa
and Nikol Pashinyan in Armenia demonstrate how initial political favour can quickly dissipate if leaders fail to meet citizens' expectations.
Ramaphosa's tenure, initially marked by high hopes dubbed "Ramaphoria", ended in disappointment due to continued corruption, lack of bold economic decisions, and worsening service delivery problems. Similarly, Pashinyan’s popularity plummeted when his governance decisions led to public discontent.
In South Africa, Ramaphosa's presidency was initially seen as a turning point, a chance to address the "nine wasted years" under Jacob Zuma. However, the challenges of governing in a deeply divided and economically troubled country proved daunting.
The failure to tackle key issues like unemployment, crime, and corruption eroded the public's trust and led to a historic drop in support for the ANC in the 2024 elections.
For democracies to succeed, good governance is essential. This means using state resources effectively to improve the lives of citizens, creating a conducive environment for businesses, and ensuring ethical and effective leadership.
The World Governance Survey highlighted that development progress correlates strongly with governance quality across several domains, including civil society, political society, government effectiveness, bureaucratic quality, economic society, and the judiciary.
Good governance is characterised by transparency, accountability, and
the rule of law. It requires leaders to prioritise the public interest over personal gain and to implement policies that promote social and economic justice. Without these principles, democratic institutions become hollow and fail to deliver on their promises.
Human capital developmentencompassing education, health, and community involvement - is crucial for economic success and should be a national priority. Education systems must be strengthened to equip young people with the skills they need to succeed in a modern economy.
Healthcare services should be accessible and of high quality to ensure a healthy workforce. Community involvement fosters social cohesion and empowers citizens to take an active role in their development.
Infrastructure development is equally important. Issues like damaged roads, unreliable water and electricity supply, and poor public services require urgent government attention and resources, emphasizing the need to eliminate tender fraud and corruption. Proper infrastructure is the backbone of economic growth, facilitating trade, improving access to markets, and enhancing the quality of life for all citizens.
Citizens must remain engaged in the political process beyond voting. They need to scrutinise political actions, hold leaders accountable, participate in community and civic activities, and partner with civil society organisations that conduct research and advocate for public interests.
Good governance, symbolised by the effective use of state resources, ethical leadership, and robust civic engagement, is key to unlocking development and improving lives.
Active citizenship involves staying informed, participating in public discourse, and taking part in community initiatives. It also means using democratic and legal means to challenge corruption and inefficiency. By remaining vigilant and engaged, citizens can ensure that their leaders remain accountable, and that democracy delivers on its promises.
Democracy in Nigeria and South Africa must transcend the mere granting of political rights and civil liberties. It must deliver tangible socio-economic benefits through effective governance, infrastructure improvement, and human capital development. Only then can democracy truly improve citizens' lives, maintaining their faith in democratic systems and fostering stable, prosperous societies.
The future of democracy in these nations depends on a concerted effort to address the root causes of dissatisfaction and to implement policies that promote development and justice.
By prioritising good governance, investing in human capital, and improving infrastructure, Nigeria and South Africa can create a brighter future for their citizens and serve as models for other democracies around the world.
Accountants play an integral role in helping individuals and businesses manage their finances and ensuring all financial records are maintained and reported accurately. However, this can make them liable for any incorrect statement or misrepresentation of financial health.
Due to accountants' significant responsibilities, many ethical standards have been put into place to prevent misleading financial information.
Ethical standards in accounting encompass the moral principles and rules that accountants are required to adhere to during their professional work. This is especially important during an audit. With the power that accountants hold when accessing different types of financial information, ethical standards help prevent any type of abuse or manipulation of numbers and funds.
The original ethical code was written in 1905 by the American Association of Public Accountants, making it the first set of ethical standards in the financial industry. Today, the ethical code has been updated and transformed into five subdivisions of principles that all CPAs are required to follow.
Integrity: Professional accountants are expected to be completely honest throughout all business relationships, and all information that accountants provide and report on is expected to be truthful. Accountants are also required to never be associated with information that is misleading or false.
Objectivity: Professional accountants should not be influenced by others or allow bias or conflicts of interest when reporting on financial statements.
Professional competence and due care: Professional accountants are required to maintain their knowledge and skills at the level needed to provide the best service to clients or employers. This level is based on current developments in practice, legislation and techniques in the accounting industry.
Confidentiality: Professional accountants should be respectful of their business relationships' confidentiality and are expected
to never disclose any type of information unless there is a legal requirement to do so.
Professional behaviour: Professional accountants must comply with all laws and regulations and refrain from any type of behaviour that will hurt the reputation of the accounting profession.
These fundamental principles are the building blocks of accounting ethics and help shape the financial
industry and its behaviours today. All professional accountants are required to comply with these principles.
Past accounting scandals
Ethical accounting practices are highly enforced due to past scandals that impacted businesses and their reputations. Here are highlights of some of the most significant accounting scandals in recent history.
Enron: Enron Corporation was a U.S. energy service company founded in 1985. Enron was a
lead trader of energy between producers and customers and had continued success during the 1990s bull market. As competition began to increase in 2000, however, Enron started facing many difficulties as its profits decreased.
Enron began abusing the use of special purpose entities and dumped any of its troubled assets into those types of entities. Any problems that Enron was facing were kept off the books. creating the illusion that its financial health was not as problematic.
By 2001, Enron's scandals started to come to light, and it posted a $648 million loss and a $1.2 billion decrease in shareholder equity. The Securities and Exchange Commission then launched an investigation into Enron, and countless Enron executives were sentenced to prison due to illegal financial practices.
Waste Management: Around the same time as Enron, Waste Management was involved in an accounting scandal of its own. In 1998, Waste Management was not meeting its target earnings, >
which would affect the company's chief officers' compensation.
This situation caused chief officers to begin to commit fraud by changing financial statements that made it appear as though Waste Management's earnings were higher than they actually were. When an audit was conducted on the company's books, the officers went so far as to bribe the accountant who found discrepancies within their reporting.
Waste Management's owner and top executive were found guilty, and its auditor, Arthur Andersen, was fined $7 million.
WorldCom: WorldCom was once the biggest long-distance provider in America and had a market capitalization of $175 billion when technology was booming. When companies began cutting down on telecom services, WorldCom struggled to maintain its profits.
To cover this up, WorldCom inflated its profits and falsely recorded expenses as investments. This led to an incorrect report of $1.4 billion in profit in the first quarter of 2002 instead of a loss.
Two whistleblowers, Cynthia Cooper, vice president of WorldCom's internal audit
department, and Gene Morse, who was also on the auditing team, took matters into their own hands and investigated the company themselves. This investigation's findings led WorldCom to file for bankruptcy in July 2002.
Due to such extreme accounting scandals from some of the biggest companies in America, many regulations were put in place to curtail future instances of fraud.
One major regulation enacted within the accounting industry at this time was the Sarbanes-Oxley Act.
The SOX Act was passed in 2002 following numerous accounting scandals, with Congress seeking to prevent company personnel from interfering with any type of independent audit that was being conducted. In addition, the SOX Act promoted:
• An internal control structure for financial procedures;
• Criminal liability to those who partake in unlawful actions; and
• Independence of audits.
It further prohibited:
• Manipulation and fraud;
• Companies from punishing whistleblowers; and
• Improper influence on audits.
This act, along with other laws and regulations and the accounting ethical guidelines, has been put into place in America to maintain trustworthy standards.
As our economy continues to grow and technology evolves, regulations are adjusted accordingly to maintain fundamental accounting principles. In one example on the technology side of things, artificial intelligence has recently emerged as a tool that many businesses are utilizing, resulting in a reassessment of certain practices.
The application of AI technology to accounting practices has been much talked about lately. The case study "Aligning Artificial Intelligence with Ethical Accountancy: A Global Perspective on Emerging Frameworks" takes a close look at how AI can bring countless opportunities to the accounting industry, but along with these opportunities come ethical challenges.
When adopting AI technology into accounting practices, if businesses choose to do so, it will be important to still adhere to the five ethical values and ensure that any use of the technology meets industry regulations.
Ethical
standards in accounting encompass the moral principles and rules that accountants are required to adhere to during their professional work.
But this, of course, is merely one example. The concept of ethical accounting has developed over time, adjusting to laws, regulations and technological changes. As new challenges emerge in the future, it will be vital to always hold to the five principles of ethical accounting, as they can be applied to any accounting situation.
*Vahue is a Content Specialist and an Ambassador at Crawford College of Business and Entrepreneurship at Kent State*
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Welcome to the Auditing SA Trivia Challenge! Test your knowledge on a variety of fun and interesting topics, and discover how well you know the inner workings of financial oversight, accountability, and public sector audits in this engaging quiz. Let’s begin!
That is a very interesting interview with the Accountant General on the accountability eco-system. I believe he is the perfect fit for the job, and he seems to be fully focused on his task.
- Thabang Mokoena
The Accountant General, Mr Shabeer Khan, makes a good point about the need to retain skills in the public sector. He has dispelled the myth that public service doesn't attract accounting and auditing professionals.
- Elmarie Janse van Rensburg
Help develop our eMag with your insightful comments. What topics do you want the Auditing SA to feature? What would make it a great magazine for our diverse audience of auditors and accountants?
We would appreciate your feedback on our magazine and the SAIGA website. By hearing from you, we aim to stimulate conversations, tackle complex topics, follow developments in your industry, and share knowledge.
Your feedback will be published in the next edition. So, tell us what you think and be a contributor.
Your Magazine, Your Say!
Email your comment to: researcher@saiga.org.za
2. Which act governs the practice of auditing in South Africa?
A) Companies Act
B) Auditing Profession Act
C) Financial Management Act
D) Public Finance Management Act
4. Who is the minister without portfolio in the first administration? 1 2 3 4 5 6
3. What is the name of the largest national park in the Southern hemisphere?
A) Kruger National Park
B) Addo Elephant National Park
C) Table Mountain National Park
D) Kgalagadi Trans frontier Park
• On July 18, 1918, South African anti-apartheid leader and president Nelson Mandela is born in Mvezo.
• On 28 July 2004, South Africa gets a new R5 coin with distinct security features designed to outsmart counterfeiters.
6. Post 2024 elections, how many parties are in the Government of National Unity? to outsmart counterfeiters.
• On 1 August 2003, Graeme Smith scores a double hundred against England in a Test match at Lord’s in London.
• On 1 August 2003, Graeme Smith scores a double hundred against England in a Test match at Lord’s in London.
• On 9 August 1956, women’s march takes place in Pretoria, South Africa. The marchers' aims were to protest the introduction of the Apartheid pass laws for black women in 1952 and the presentation of a petition to the then Prime Minister J.G. Strijdom.
• On 9 August 1956, women’s march takes place in Pretoria, South Africa. The marchers' aims were to protest the introduction of the Apartheid pass laws for black women in 1952 and the presentation of a petition to the then Prime Minister J.G. Strijdom.
Sept:
• On 12 September 1977, Anti-apartheid activist Steve Biko dies in police custody.
• On 12 September 1977, Anti-apartheid activist Steve Biko dies in police custody.
• On 11 September2001, The United States experience one of its most devastating terrorist attacks when hijackers flew planes into the World Trade Centre in New York City and the Pentagon in Washington, D.C. Nearly 3,000 people were killed, and the event led to significant global political and military changes.
• On 11 September 2001, The United States experience one of its most devastating terrorist attacks when hijackers flew planes into the World Trade Centre in New York City and the Pentagon in Washington, D.C. Nearly 3,000 people were killed, and the event led to significant global political and military changes.
