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23 August 2004

Last week, we watched with interest and amazement as some politicians and NGOs charged and found Dr Mvuyo Tom guilty of incompetency. The charges were formulated in general terms. This criticism was also extended to the Head of the Provincial Treasury, Mr Monde Tom.

This has prompted some of us to ask a number of questions. Foremost among these is: What exactly is the role of the Director-General of a Provincial Administration?

Answering this question is critical in evaluating Dr Tom as he leaves this administration and in setting realistic targets for the next Director-General. A second question is: What is the role of Provincial Treasuries in the context of the Public Finance Management Act (PFMA)?

A proper evaluation of the performance of these officials requires an in-depth understanding of the regulatory framework in which they operate. Regrettably, it does not seem that their critics have attempted to familiarise themselves with that regulatory environment.

Over the past two decades, the OECD economies have seen growing deficits and declining revenues.

The growing deficits have largely been as a result of an aging population in the case of continental Europe. Revenues have been declining as a result of different economic realities, with an added factor being an electorate that refuses to pay higher taxes. To fund new priorities, governments had to be creative and innovative in order to realise savings and raise the level of efficiency in government.

This objective could only be achieved by changing how government functioned. Key elements of this reform were the devolution of managerial responsibility to managers, who were held accountable for public sector performance. They were given direct authority over public resources.

The philosophy underpinning this management approach is described by Professor Mark H. Moore in his book, Creating Public Value: Strategic Management in Government. The fundamental tenet of the approach he describes is to shift the focus from reliable control of organisational operations and inputs to the achievement of results - the outputs. This approach produces a mindset of entrepreneurs, leaders or executives - not a mindset of bureaucrats or administrators.

Their principal managerial objective should not be to perfect their organisations' traditional roles, but to search for innovations that can change their role or increase their value to the polity.

Professor Moore concludes by saying that society denies its public sector the key ingredient on which its private sector specifically relies to remain responsive, dynamic and value creating: namely the adaptability and efficiency that come from using the imaginations of people called managers to combine what they can sense of public demands with access to resources and control over operational capacity.

South Africa has not escaped the winds of change in managerial thought now sweeping through the public sector. Government has prioritised the transformation of the public sector to enable it to meet the needs of the people and the objectives of the Reconstruction and Development Programme. However, it has the same budget constraints as the OECD economies. In 1996, the South African government said that it would not impose a tax burden on South Africans of more than 25% of GDP. This is in the context of a massive demand on public services, given the apartheid social backlog.

To meet the challenges of these sometimes constitutional mandated basic services, managers, more and more, are going to be required to be creative in the use of public resources. Managerial autonomy and flexibility are becoming key features of public sector reforms.

The changes have, like in the OECD, focused on human resource and financial management. In terms of the Public Service Act of 1994, the Director-General, as the head of the Provincial Administration, was responsible for, among other things, efficient management and administration (including utilisation and training of staff), maintenance of discipline, and promotion of labour relations. The Public Service Laws Amendment Act of 1998 has removed some of these powers from the Director-General. He does not exercise any power over the head of a provincial department.

The Public Service Regulations of 1999 have devolved management powers and functions to the Executing Authority (Minister/MEC), who may delegate further to ensure service delivery. Those who criticise the Director-General for the poor performance of heads of provincial departments are barking up the wrong tree.

The adoption and implementation of the PFMA signalled another phase of the programme of reforms. In the past, financial processes controlled by centrally prescribed bureaucratic rules that allowed little scope for managerial discretion, and even mundane issues had to be referred for "Treasury approval".

This was in fact financial administration, regulating how money was used to "buy" inputs, and diverting attention from the delivery of the outputs that the inputs were intended to achieve. This approach did not clearly define responsibilities, and resulted in poor accountability and value for money.

The PFMA aims to modernise financial management in the public sector. It enables accounting officers (heads of departments) to manage but, at the same time, holds them accountable for the resources they use. It establishes clear lines of accountability and the broad frameworks of best practices that managers can adopt or, where necessary, adapt.

The calls for Provincial Treasury to micro control departments that are not complying with the letter and spirit of the PFMA.

It is unfortunate these broad and sweeping changes taking place in the public sector are not known. More disturbing is the fact that even public representatives who are supposed to be exercising oversight over the executive arm of government seem not to understand the rules of the game.

The World Bank argues in one of its studies that there is correlation between institutions and budgetary outcomes. The presence of accountability and transparency frameworks, together with a vibrant media and a strong NGO movement, are some of the ingredients.

In terms of Section 32 of the PFMA, government publishes quarterly spending trends. Government also publishes the Intergovernmental Fiscal Review comparing provincial performance every year. Departments are required to table annual reports in the Legislature. This information is useful to the extent that it can be utilised by public representatives, the media and the NGOs to the benefit of the communities, which we all serve.

We are raising these issues because the criticisms levelled against Dr Tom (clan name Mawawa) and Mr Tom (clan name Hlati) is not based on an understanding of the public sector regulatory framework that guides their action. We are making no pronouncement on whether they are good or bad managers. They have signed performance contracts with their Executing Authorities. They must account to them for outputs contained in those contracts. The Executing Authorities, in turn, must account to the legislature and the public for the outputs and outcomes.

This is the accountability chain that is envisaged by the public sector reform framework .An understanding of these issues will raise the level of debate about the use of public resources, that is, the taxpayer's money in the final analysis.

Department for Provincial Treasury, Eastern Cape Provincial Government
23 August 2004
Source: Eastern Cape Provincial Government (http://www.ecprov.gov.za)