Programme Director
Distinguished guests
Ladies and gentlemen.
Warm greetings on behalf of the Public Protector South Africa Team! Your interest in our work and commitment to promoting dialogue on issues relating to maladministration and good governance is sincerely appreciated.
April is a special month in government. It is the beginning of the fiscal year and therefore a month of new beginnings. Brimming with hope, my team, and I believe, as many others in the public service do, that it is a time to reflect on what went well and what went wrong in the past year and how to get things right this time.
April is also special to the nation because it is the anniversary month of our hard earned constitutional democracy. This year is particularly special because it marks the beginning of the last 12 months before our constitutional democracy achieves the second decade milestone.
Today we’ll be presenting five reports that seek to communicate the outcome of our investigations into improper conduct or maladministration in state affairs.
What is maladministration?
I recently came across this curious definition that prevailed a century ago. In The Common Law of England, Odgers, WB (Sweet and Maxwell, 1911), maladministration is defined as: “...all misconducts in high places, all oppressive and overbearing acts on the part of those who are drest in a brief authority.”
Although the concept of maladministration has evolved over the years, the original elements remain. The Public Protector Act for example has the following collection of wrong doings as part of maladministration:
i. Maladministration in connection with the affairs of government at any level;
ii. Abuse or unjustifiable exercise of power; or unfair, capricious, discourteous, or other improper conduct or undue delay by a person performing a public function;
iii. Improper or dishonest act, or omission or offences referred to in part 1 to 4, or section 17, 20 or 21 of the Prevention and Combatting of Corrupt Activities Act, 2004;
iv. Improper or unlawful enrichment, or receipt of any improper advantage or promise of such advantage, by a person as a result of an act or omission in the public administration or in connection with the affairs of government at any level; or
v. An act or omission by any person in the employ of government at any level, or a person performing a public function, which results in unlawful or improper prejudice to any other person.
You will note how extensive the jurisdiction is. But every day, my team and I never cease to be amazed at the objections we receive regarding jurisdiction.
Perhaps this is a good place to appeal to lawyers that advise government, particularly the external ones that are paid a fortune in an effort to insulate persons entrusted with public power from explaining their conduct to the citizens and others affected by such conduct, to please read the Act before advising. For example, don’t tell your client that he/she has not violated any law without checking the above prohibitions, which are captured in section 6(4) of the Public Protector Act. If your client has violated any of the above, we don’t need them to have violated any other law. We only use the other laws as a benchmark to unpack the content of the above violations.
To my dear legal colleagues, will you also make sure that you read the Constitution and the right statute because we often act in terms of additional powers conferred by statutes such as the Executive Members’ Ethics Act, Protected Disclosures Act, Prevention and Combatting of Corrupt Activities Act, Promotion of Access to Information Act and the Housing Protection Measures Act, among others.
I am making this appeal because misguided advice to the state is increasingly causing unnecessary delays in investigations and the implementation of remedial action. This not only prolongs the suffering of victims of maladministration, it contributes to tensions between communities and government and contributes to incidences of public protest which often turn violent. If you undermine our efforts therefore you are undermining my office’s role in supporting and strengthening constitutional democracy, and by implication, you are weakening constitutional democracy.
The reports we intend to share with you today cover some of the elements of maladministration I’ve outlined above. You will note that some took a long time to complete despite our commitment to ensure that all investigations are swift and thorough. Many of the delays owe to failure to get information expeditiously.
The main report we are releasing today under the title: There are no heroes communicates my findings and directives on remedial action following a complaint by the then Commissioner of the National Consumer Commission (NCC) against the DTI, which hosts the NCC.
I will start with brief overviews of the other four. Also please note that in addition to Fact Sheets on the five reports to be released today, we have included, in your press kits, Fact Sheets updating you on investigations that are at an advanced level. We have given priority to investigations that are the subject of recent Frequently Asked Questions (FAQ). During question time, you are free to ask about those and any other investigations.
Sombre records of our past
Report No 3 of 2013/2014 titled “Sombre Records From Our Past” captures a pensioner’s 14 year journey as she tried to get the Eastern Cape Department of Education to recalculate her pension pay out after having alerted the relevant authorities being the ECDOE and the then GEPF that her pre-1990 contributions, while working under the Transkei Education Department, dating back to 1973, had been omitted.
The new story given to Mrs Mdaka, who is now 60 years of age, is that the amount was paid in a separate cheque by the GEPF to the ECDOE, the ECDOE in turn claims to have posted it to an address where the complainant never lived and which was never included by her in any of her documents. My finding is that there is sufficient evidence proving that Mr Mdaka is owed the outstanding pension pay money. My finding is also that the conduct of the ECDOE and the Government Pension Administration Agency (GPAA) has been improper and constitutes maladministration. They have been asked to calculate and pay the outstanding money with interest, within 30 days.
Unpaid services
Report No 4 of 2013/2014 captures the journey of Mr DL Mogotsi who has been trying to get paid by the Ngwathe Municipality for services rendered as a construction contractor 5 years ago(2008). After having been informed in writing that the municipality was still assessing the value of his services shortly after submitting his invoices, he has received no further answers from the Municipality. The MFMA requires suppliers to be paid within 30 days of invoicing. My office also struggled to get any answers. All we have are contract documents and the certificate from the supervising engineer appointed by the municipality confirming that he had done work worthy of the invoice he issued. My finding is that the conduct of the Municipality is improper and constitutes maladministration. I’ve directed that he be paid within 30 days.
Right or Privilege
Report No 5 of 2013/2014 deals with the trials of a small business person seeking a business opportunity to supply employees of the Department of Correctional Services with sports clothing. The gist of the complaint was that the department wrongfully denied him access to a persal deduction code by refusing to apply for such to the National Treasury on his behalf. My finding is that the refusal was justified as the department already had an adequate number of suppliers.
However, I have found that the process of engaging with him failed to comply with the requirements of just administrative action under section 33 of the Constitution and the Promotion of Administrative Justice Act (PAJA) in that was not given written reasons or informed on how to appeal the decision despite his request. I’ve also found that the service providers currently in the system were improperly procured as there was no open tender process. The department has accepted the findings and is in the process of terminating current contracts and advertising the tender.
Not Above Board
Report No 2 of 2013/2014 has been issued more for educational purposes than to make a difference in the matter itself. The report captures my findings and directives on appropriate remedial action following an investigation into alleged maladministration relating to the appointment of the CEO of the Eastern Cape Gambling and Betting Board. The gist of the complaint was that the current CEO should never have been appointed as he was a domestic partner of a person working for the state at the time of appointment. He failed to disclose this and should he had so disclosed he would have been disqualified. The matter revolved around the meaning to be ascribed to section 6(k) of the Gambling Board and specifically whether or not a CEO can be regarded as a member of the Board and therefore subject to all ethical standards required of Board members.
Despite the Board and MEC’s protests, my finding is that a CEO who is an ex officio member of a Board is a member of the Board and therefore subject to all ethical standards for Board Members. I’ve determined therefore that Mr Z should never have been appointed. However, with regard to remedial action, I have only sought to fix the future as the past is too far gone.
There are no heroes
I now turn to the main report.
“There are no heroes” is report no 1 of 2013/2014 of the Public Protector in terms of section 182(1) of the Constitution of the Republic of South Africa Act, 1996 (the Constitution) and section 8 (1) and section 8(2A)(a) of the Public Protector Act, 1994 (the Public Protector Act). It is the result of an investigation and attempted conciliation process involving allegations of abuse of power submitted by the then Commissioner (the Commissioner) of the National Consumer Commission Ms Mamudupi Mohlala-Mulaudzi against the Director General (DG), Mr Lionel October of the Department of Trade and Industry (DTI). The National Consumer Commission, an independent statutory body, is South Africa’s cardinal consumer watchdog, which is administratively located in the DTI.
The Commissioner approached the Public Protector on 28 March 2012 making allegations of abuse of power against the DG of the DTI. The complaint included various allegations of abuse of power, interference in NCC operations and harassment in retaliation to her resistance. The main allegations related to the DG’s alleged co-management of staff of the NCC transferred from the DTI, the main grievance being the DG’s alleged withdrawal of some of these without notice causing disruptions to the NCC’s operations. A related allegation was that the transfer of the staff was not handled properly by the DTI and the transfer agreement was never presented to or signed by the Commissioner.
The Commissioner further alleged that DTI had procured goods and services for the NCC without her consent and made certain payments without her knowledge or authorisation when she was already on board. She further alleged that the DG was interfering in her operational independence by questioning her decisions on motor industry matters on behalf of that industry. She alleged that her resistance to DTI’s interference in her operations had been met with retaliatory action, including withdrawal of needed support, particularly in regard to the procurement of financial systems. She further alleged that she was placed under virtual financial administration and ultimately subjected to multiple investigations and audits, facing at one stage five concurrent processes of this nature. The Commissioner also alleged that she had no performance agreement.
Upon assessment of the complaint, I endeavoured to conciliate between the parties at a meeting held on 25 May 2012. The issues isolated from the complaint and the first conciliation process was the following:
1) Abuse of power by the DTI and interference in the management of the NCC in respect of HR matters, procurement and finance;
2) Violation of operational independence;
3) Harassment by:
- Subjecting the NCC to multiple investigations
- Withholding support; and
4) Failure by the Minister to sign a performance agreement with the Commissioner.
At the initial conciliation meeting, the DG of the DTI made the following counter allegations against the Commissioner, which were later supported by the Minister:
1) Governance failure especially financial systems and procurement failures; and
2) Failure to sign staff performance agreements.
When it became clear that the conciliation process was not likely to yield any tangible results, I decided to investigate the matter with a view to making a determination or findings as envisaged in the Public Protector Act, 23 of 1994.
In the end, the matters requiring a determination comprised a combination of the four issues raised by the Commissioner and the two issues submitted by the DTI represented by Minister Rob Davis and the DG, Mr Lionel October in various documents and meetings.
As part of the investigation process, meetings were held with representatives of the DTI, the Auditor General of South Africa as well as the Minister of Trade and Industry. Documents such as memoranda, letters and e-mails, were perused.
I had to determine the propriety of the conduct of the DTI, primarily the Minister and DG, and in response to the counter claim, the conduct of the Commissioner. The test for proper conduct was constructed from the legal framework, policies and prescripts regulating the operations of the NCC as an independent statutory consumer watchdog and its relationship between with the DTI as the hosting department. The framework revealed that the clearly defined relationship is between the Minister and Commissioner. The Consumer Protection Act emerged as the main instrument regulating the relationship. Key among its provisions is the fact that the relationship is between the Commissioner and the Minister. Also worth noting is that the Commissioner is regarded as the Accounting Authority of the NCC, with responsibilities that incorporate those of an Accounting Officer under the PFMA.
The role of the DG of the DTI and consequent relationship with the Commissioner is left to conventions that have emerged over the years around the relationship between the DTI and the parastatals, mainly State Owned Enterprises (SOE) that fall within its remit. It is noteworthy, for example, that although the NCC is not an SOE, being an independent regulatory body, the key administrative instrument regulating its relationship with the DTI is referred to as a Share Holder Compact as is the case with SOEs. It is worth noting though that the shareholder compact is an agreement between the Minister and the Commissioner.
The PFMA on the other hand, specifies the role of Accounting Authorities while also defining the role of the transferring Accounting Officer, referred to as Group Accounting Officer by the DTI. The responsibility of the “Group Accounting officer” regarding the handling of transfers to statutory entities, is principally regulated by section 38(1)(j) of the PFMA. The key requirement is that the Accounting Authority needs to provide a letter certifying that sound financial and related systems have been created before a transfer of funds is made. What happens in the event of a subsequent system failure or suspected system failure is left to the DTI conventions. Herein lays the roots of the stormy relationship between the DTI’s Departmental Accounting Officer and the Commissioner as the Accounting Authority of the NCC.
In the search for the ideal relationship between the DTI and the NCC, consideration was also given to the broader regulatory framework, including the principles of cooperative governance as envisaged under section 41(1)(h) of the Constitution. The section states that all spheres of government and all organs of state must cooperate with one another in mutual trust and good faith by fostering friendly relations and assisting and supporting one another.
My findings are the following:
(a) Maladministration and abuse of power by the DTI and interference in the management of the NCC in respect of HR matters and finance:
(i) Interference in Human Resources Management
The signed Shareholder Compact between the NCC and the DTI indicates that the Commissioner should have sufficient freedom to manage the affairs of the NCC balanced against the responsibility to exercise such freedom within the agreed mandate as outlined in the relevant legislation and the framework of effective accountability. This was clearly not the case in the relationship between the NCC and the DTI. My impression of the relationship between the parties was one of an “overprotective parent not willing to allow an 18 year old child” to stand on his/her own feet.
The Shareholder Compact further states that the parties entered into the Compact on the basis of mutual co-operation and good faith. However, no sign of mutual cooperation or good faith was visible during my attempted conciliatory meetings between the parties and their general actions towards each other.
The Transfer Agreement of staff indicates that the Commissioner should have been requested to sign the document as the employer department, but she was never requested to sign the agreement and as such she never became a party to the agreement. The DTI ignored the Commissioner and expected her to adhere to the conditions even though she was not given an opportunity to be a signatory to the Transfer Agreement.
Staff members were seconded and transferred to the NCC with effect from 1 April 2011 and the Minister delegated all HR functions to the Commissioner on 18 April 2011.
When the DG became aware of complaints by the NCC staff regarding working conditions at the NCC, he unilaterally decided to transfer them back to the DTI via internal memoranda. There is no indication that the Commissioner was consulted or that there was any formal communication to the Commissioner to inform her that her staff would be removed with immediate effect. The DG clearly abused his authority in this regard.
In the DG’s own words, “the removal of staff was disruptive” and it is clear that he abused his power in this regard as his conduct went well beyond merely “providing support” to the NCC.
My finding is that the DG of the DTI, Mr Lionel October, had multiple direct interactions with the NCC staff and eventually authorised the withdrawal of some staff arbitrarily without the Commissioner’s knowledge or approval causing major operational disruptions.
The conduct of the DTI constitutes a violation of the Commissioner’s operational independence, an unfair labour practice, an act of abuse of power and maladministration.
(ii) Interference in Financial Management:
My finding is that the DG had the authority in terms of section 38(1)(j) of the PFMA and Regulation 8.4.2 of the Treasury Regulations to withhold the transfer of funds to the NCC until such time as the public entity (NCC) met the financial conditions that the DTI had and until such time as the NCC had the necessary systems in place.
However, as much as there should be adherence to the prescripts in terms of the PFMA and the Treasury Regulations, I was concerned about the breakdown in the mutual trust and good faith between the DTI and the NCC.
I’m further concerned over the lack of clarity regarding the day to day roles of the Accounting Authority and the Group Accounting Officer.
The manner, in which the authority was exercised, however, fails to meet the test of good administration. Although lawful, the DTI’s conduct was unfair, unreasonable and constitutes maladministration.
(ii) Violation of operational independence:
The DG, Mr Lionel October, did meet with certain role players in the motor industry, wherein the Commissioner’s conduct was discussed. He subsequently requested feedback from the Commissioner on the Ombud Scheme for the Motor Industry and inputs on enquiries received from the Portfolio Committee on Trade and Industry. However, I am unable to find that the DG’s conduct amounted to interference with the mandate of the Commissioner as he did not direct her to do anything.
(iii) Harassment through multiple investigations:
It is correct that the NCC was indeed subjected to multiple enquiries and audit investigations at the same time. While the AGSA was conducting its audit, the Minister also requested an Independent Forensic Audit to be conducted by Grant Thornton as well as an internal audit. The Public Protector investigation was also taking place around the same time, a fact known to the DTI. At a stage when the DG had already withdrawn staff members from the NCC, these audits stretched the NCC staff unduly. This meant that the NCC was unable to execute its functions properly because of being subjected to multiple investigations. While there is nothing wrong with auditing, per se, the pressure placed on the Commissioner does amount to abuse of power.
Prejudice suffered because of support withheld:
I firmly hold the view that when the NCC chose the option to do things independently, some of the support was withheld. In this regard, I specifically find that it was improper for the DTI not to provide the NCC with resources for the purchasing of financial systems and advertising of the post of the CFO. I accordingly hold that the DTI’s conduct was improper and constitute abuse of power and maladministration.
(d) Failure to sign Performance Agreement:
Even though a Contract of Employment and a Shareholder Compact were signed between the Minister and the Commissioner, no Performance Agreement was ever signed between the parties.
The Commissioner submitted a draft agreement to the Minister, albeit, 7 months later than expected, the Minister only responded 6 months later by way of a letter to indicate that he was satisfied with the performance agreement, but still without signing the Performance Agreement.
In a situation where relationships between the parties were already stretched it would have assisted enormously if the Minister ensured that the Commissioner’s Performance Agreement was signed timeously.
(e) Findings on the counter complaint by the DG
(i) Governance failure relating to financial systems and internal controls
On alleged Lack of Financial Management Systems, it is clear that the NCC failed to implement proper financial systems until a very late stage of the financial year. However, the DTI is partly responsible for this failure, in view of its tardiness in providing resources for the purchasing of financial systems. The Auditor-General further found mistakes in financial reporting and that the Audit Committee was only appointed 3 months before the end of the financial year
On alleged irregular procurement of office accommodation, the procurement of the office accommodation for the NCC did not comply with the SCM Policy requirements and section 51(1)(b)(ii) of the PFMA. The procurement by the NCC was regarded as irregular expenditure by the Auditor-General in his Final Management Report.
The acts and omissions of the commissioner regarding financial systems, constitutes maladministration. However, the context of being a new entity and the lack of support mitigate the severity of the impropriety. The procurement of offices is the subject of a different Public Protector Investigation into various alleged governance and administrative irregularities.
(ii) Failure to Sign Employee Performance Agreements
The NCC failed to enter into performance agreements with staff on account of the absence of a signed performance agreement between the Minister and the Commissioner. My view is that by taking a legalistic stance regarding the need for her to have a signed agreement and failing to enter into any agreements with staff even if such could have been regarded as interim agreements, the Commissioner undermined her own ability to manage performance effectively. Her draft Performance Agreement and the NCC’s Strategic Plan were adequate to provide guidance.
While the conduct of the NCC generally and the Commissioner, specifically, was lawful, it was improper and constitutes maladministration.
General Observations
There seems to have been different interpretations of the independence of the NCC in the context of the DTI’s responsibility as a “shareholder”. The law is very specific that the NCC is independent yet the PFMA has certain requirements. The relationship between the Minister and the Commissioner also was defined in one way in principle yet different expectations informed the situation. The notion of “shareholder” appears to have contributed to the distortion.
The relationship between the DG (as accounting officer of DTI) and the Commissioner (as Accounting Authority of NCC) broke down largely because of improperly defined functions and powers. In the end, the broken down relationship was to the detriment of the NCC. The DTI admitted that it allowed the NCC to choose between creating its own systems or leaning on departmental support. But it would appear that as soon as the choice to go for own systems was exercised, the attitude of the DTI hardened. The offer to choose reminds me of the option that Henry Ford gave to the Americans when he said: “Americans can have any car they want in any colour they want as long as it is black.”
The NCC wanted to walk independently whilst it was still learning to crawl, while the DTI wanted a full parental relationship. The reality is that the DTI has vast experience in the establishment of public entities and knew what was required to set up the NCC to ensure that it became a well-functioning public entity. Unfortunately, in its efforts to assist the NCC with its establishment it took the role of a parent unwilling to allow a maturing child to stand on its own feet.
Both parties can however, take another look at what was envisaged in Chapter 3 of the Constitution as co-operative governance as they both failed miserably at it.
Remedial action to be taken, as envisaged in section 182(1) (c) of the Constitution is the following:
The Minister must take urgent steps to ensure that:
(a) there is a clear definition of the relationship between the DG and the Commissioner as well as the Minister’s role;
(b) The Commissioner’s role as Accounting Authority is clarified; and
(c) The HR management processes are clarified.
(d) The NCC should continue its on-going process of tightening its financial accounting and supply chain management processes.
As on previous occasions, my team and I have played our part. The next move belongs to the government, the media, the people and Parliament.
I have done all I could to comply with section 182 of the Constitution which mandates me to investigate, report and take appropriate remedial action where there is alleged or suspected improper or prejudicial conduct in state affairs or the public administration.
The reports are also a product of my attempt, with the help of the Public Protector Team throughout the country:
“…to endeavour, in [my] sole discretion, to resolve any dispute or rectify any act or omission by:
(i) Mediation, conciliation or negotiation;
(ii) Advising, where necessary any complainant regarding appropriate remedies; or
(iii) Any other means that may be expedient in the circumstances;”
The reports are issued in terms of section 8 of the Public Protector Act.
I trust you to play your part in encouraging public dialogue on the reports and the pursuit of good administration and good governance. Such dialogue will inevitably contribute immensely to the implementation of findings and remedial action. It will also ensure that the lessons learned from the sad experiences of people dealing with officialdom, contribute meaningfully to the transformation of the state into the one envisaged by the framers of our Constitution. That state, which is optimally positioned to deliver an improved quality of life to all citizens as promised in the preamble to the Constitution and the Bill of rights, is a state that is accountable, operates with integrity at all times and is responsive to all persons and communities.
Thank you.
