The Committee was briefed by Auditor General SA on its new mandate that gives it the ability to refer cases, recommend remedial action and issue certificates of debt. AGSA identified 16 auditees with material irregularities during the 2018/19 audit. The process is the accounting officer is notified, and given 20 days to respond to the notification of the material irregularity. AGSA will then allow reasonable time - up to six months - for its recommendations to be implemented. AGSA will follow up and if the recommendations were implemented. then remedial action will be implemented on the accounting officer. Once remedial action has been recommended, when following up, the accounting officer will be given 20 days’ to respond about the steps that have been taken. Once AGSA gets the responses, they will be assessed. If they are insufficient, the accounting officer will be notified that AGSA is going to start the certificate of debt process. Once the certificate of debt starts, the entity will have the opportunity to do a verbal representation to the Material Irregularity Advisory Committee appointed by the Auditor General. Based on the Committee’s recommendation, the Auditor General will consider if a certificate of debt is to be issued. This entire process of communication, notification, receiving responses and giving opportunity to do verbal presentation, can easily take up to 18-19 months. For example, for this year if there are going to be certificates of debt, it is only going to happen in October 2020. That is to ensure reasonable time is given. The Committee found the capacity building session to be very informative.
The Statistician General discussed Statistics SA’s mandate to measure and explained how statistics are central to credible planning, monitoring and evaluation. There are 250 releases of different sets of statistics per year. He shared the latest statistics such as those on the economy, population, unemployment and education. On foreign nationals in South Africa, he noted that contrary to popular narrative there are not 11 or 15 million foreign nationals in South Africa. If there were, Stats SA would see them trying to access schooling and health facilities. The illegality would catch up with them because one needs a birth certificate to send one's child to school. In addition, Stats SA would be able to track them when they die. Stats SA has tracked foreign nationals from 1996. In 1998, there were 800 000 people who were non-South African born in the country and it was reflected in the census. In the 2001 census, there were about 1 million and in the 2011 census, there were 2.2 million. Stats SA’s estimate as of now is 3.6 million persons.
Statistics South Africa was asked by the Committee to make their offices more visible to the public. The Statistician General responded that Stats SA’s challenges with finances are dire. Stats SA will address visibility using the census budget. As long as Stats SA does not get money from the state, it will have to make those kinds of choices.
Auditor General South Africa briefing
Ms Corne Myburgh, Business Executive: AGSA, said the business for today is to do capacity building. AGSA will not talk about the audit outcomes for 2018/19 as the audit is still in process. This a briefing so when AGSA returns in October, there will be a better appreciation for what it does as an organisation.
Mr Fhumulani Rabonda, Deputy Business Executive, made the presentation.
Mandate of the AGSA
AGSA gets its mandate from the Constitution and it contributes to strengthening the country’s democracy by enabling the effective oversight, accountability and governance. AGSA does that by auditing and thereby building confidence that South Africa’s democracy is working. A democracy has effective institutions and AGSA has confidence that the country's democracy is working. Section 188 of the Constitution requires AGSA to audit financial statements and the financial management of a government institution. The Public Audit Act in Section 20 gives effect to that mandate by requiring that on an annual basis AGSA has a compulsory mandate to perform audits. AGSA's audit report must cover three areas. One, is an opinion on the fair presentation of financial statements to ensure they reflect fair representation of the financial state of the institution. The second part is compliance with legislation and the third is on reported performance information. Section 5 also gives AGSA a discretionary mandate to perform additional tasks such as special audits and performance audits.
On an annual basis AGSA must audit financial statements that have been submitted to them. They also audit the performance report, as well as compliance with laws and regulations. And in the process AGSA ensures that it is adding value to the public. AGSA reports those individual findings to management, monetary officers, and accounting authorities. It provides them with value adding recommendations on how they can rectify wrongs. At the end of the audit AGSA produces audit reports and those are made public. They also report on those audits to elected public representatives through municipal council, provincial legislatures and Parliament. In cases where there are unfavourable audited outcomes, AGSA engages with role players starting with management of the institution to ensure that there is commitment from them on how to remedy the situation. Those commitments together with the root causes of the negatives outcomes, are included in the general report the Auditor General tables in Parliament annually.
Role of the Auditor General
Sometimes there is confusion as to what the AG does versus what it does not do. AGSA provides assurance that financial statements are free from material misstatements. But it does not guarantee that everything in the reporting is correct. On the performance reports, AGSA reports on their usefulness and reliability to ensure that the information presented in reports is reliable and useful. It does not provide assurance on the achievements of service delivery targets. AGSA then also reports on material compliance with the relevant key legislation. Public service has a lot of legislation so AGSA will perform scoping of legislation to decide focus areas so that they do not audit everything. The key areas will state the piece of legislation that is going to be audited as well as the particular sections. AGSA does not provide assurance that all applicable legislation has been complied with. The institution also identifies key internal contradictions that will be addressed. To give information on deficiencies, AGSA looks at both risk of material misstatement and of compliance. They do not perform identification of fraud because that requires an investigation. AGSA does not perform audits on investigations.
Within the audit process there is risk assessment, risk response and reporting. On the risk assessment side AGSA agrees to terms of engagement with the audited entity. A plan of the audit will be created. This is a guiding document on the scope which includes details such as who is going to be involved, when the audit is going to be completed and the extent of the process. Risk assessment procedures must include an in depth understanding of the entity so that AGSA is able to identify the possible risks of material misstatements and noncompliance. For reporting, AGSA reports individual findings. As findings are identified, AGSA reports them to the management of the entity, gets their responses and then an audit report will be produced. Reports are given to management, the board or accounting officer or authority. This is then presented in the legislature / council, in public and are subsequently published. The published report will include the audit opinion and material findings.
AGSA generates about five classes of audit outcomes. The worst one is the disclaimed audit which means AGSA could not make sense of the information provided to them. Usually there is a lack of supporting evidence to support the numbers presented. Therefore, AGSA is unable to provide an opinion on whether the numbers are correct.
The second audit outcome is an adverse opinion. Here AGSA is able to audit, but there are very many misstatements that affects the majority of the items in the financial statements. It renders the entire set of financial statements to be meaningless.
Then there is financially qualified. This is when the financial statements have material misstatements but AGSA can pinpoint the items. The audit report will state that the findings can be relied on with the exception of a few sections. AGSA will indicate the misstatements on the individual items. The report will also have other findings on compliance and performance.
The fourth outcome is financially unqualified with findings. This means that AGSA can make sense of the numbers presented on the financial statements and can rely on them. They are free from material misstatements. However, there are still material findings on legislation compliance or the performance report.
Finally, there is the clean audit outcome, which means that the findings have passed all three elements. Therefore, the financial statements and performance reports are free from material misstatements, and AGSA could not identify any material non-compliance.
Adding Value to Parliamentary Work
The information that comes from the AGSA has influence in parliamentary processes. This is because AGSA shares insights and root causes on audit outcomes and provides the commitments and recommendations that will help improve matters. The information has strengthened parliament’s oversight work and adds value to its work.
Trends over the past 10 Years
The slides show audit outcome trends over the past 10 years. The audit outcomes of the year ending 31 March 2019 are not yet available. They still need to go through due process. The trends presented cover up to 31 March 2018 and incorporate both national and provincial governments.
Starting with the 2008/9 financial year, only 10% of the institutions had clean audits; 18% of institutions have disclaimed audit opinions and that it was quite a huge number. There have been fluctuations and stagnations throughout the years. But it is noted that in 2015/6 there was quite an improvement with 28% of institutions with clean audit opinions and not a single audit was outstanding. Disclaimers were reduced to 6%. However, in 2017/18, only 17% of the institutions have clean audit opinions – this is without counting the 9% that is outstanding and there are still 6% that got disclaimed opinions. The bulk of institutions are sitting in the middle meaning their financial statements can be relied on and are free from financial misstatement. Although they are still battling with compliance and or performance reports.
Over the past 10 years the figures are indicating that there is a trend towards irregular expenditure. Municipalities incurred R21 billion of irregular expenditure in 2017/18. This expenditure is in contradiction of the law. Services were delivered but the law was not adhered to. This is very serious because there is disregard of the law and other checks and balances are ignored. Provincial government had R50 billion of irregular spending that year. It is also worth noting that as of the end of the year there is R161 billion worth of irregular expenditure that is yet to be dealt with. When irregular expenditure is reported, there must be an investigation. Where losses are incurred there must be a recovery. Criminal action must be taken if there was criminal conduct. As of 31 March 2018 in provincial government, R61.8 billion has not yet been investigated. In local government, R71 billion from prior years has not yet been dealt with in the accountability processes. As for fruitless expenditure, there is similar increase - national and provincial government are sitting at R2.5 billion and local government is R1.3 billion in 2017/18.
History of Unauthorized Expenditure
There are cases where institutions will either exceed the budget or will spend money for purposes other than what it was approved for. That is what is meant by unauthorized expenditure. For 2017/18, there was R12.8 billion of unauthorized expenditure at national and provincial government. For local government it was R2.1 billion. This expenditure must be investigated by the department. If it is confirmed that there is no person liable in law for the irregular expenditure, the accounting officer or accounting authority may write off the irregular expenditure as irrecoverable. Only R9 million which is less than 1% of the irregular expenditure was recovered from the liable person. R5.8 billion was condoned meaning that those with the power to do so have looked at the expenditure and the cost and determined that the expenditure was understandable. For unauthorized expenditure, less than 1% of it was recovered. R1.6 billion was approved through parliamentary or council processes where the unauthorized expenditure has been investigated.
For the unauthorized expenditure, R147 million of it was recovered or transferred to recoverable for processes to start recovery from the liable people. Over R1.6 billion was approved, meaning that the parliamentary or council process for approving the expenditure had been undertaken. In addition, a large amount of R6.5 billion was written off, meaning that it was lost and could not be recovered.
On fruitless expenditure, this cannot be condoned, its either recovered it or written off as irrecoverable. That means the person liable for this is either bankrupt or could not pay back the money. R16 million was recovered, R1.3 billion was written off and R5.6 billion is still waiting to be dealt with.
Negative Audit Outcomes
The root causes of negative audit outcomes according to our assessment is there is blatant disregard for controls, compliance with legislation and AGSA recommendations. There are capacity gaps in the institutions to be able to effect proper and effective financial management. There are a lot of vacancies and instabilities - a lot of senior positions are either vacant or are in an acting capacity. Other identified causes are unethical behaviour in the administration and also by political office bearers and leadership. Failure to address the transgressions creates a culture of no consequences.
There have been a number of initiatives implemented to improve audit outcomes. AGSA has had a lot of regular engagements with the leaders of institutions. That includes door to door campaigns and regular engagement with accounting officers to discuss the status of records review. There are regular road shows to share the audit outcomes, and the Auditor General will appear on radio, parliament and legislatures to discuss outcomes. There are also capacity building initiatives that happen in various institutions such as the parliamentary committees and working with National Treasury to ensure initiatives are implemented. AGSA has an input on those initiatives so that they can be effective in addressing a culture of poor audit outcomes.
Ms Corne Myburgh, Business Executive, AGSA, continued the presentation
Public Audit Act Amendments
On 1 April 2019, the amendments to the Public Audit Act come into effect There were three main changes:
1. If AGSA identifies a material irregularity, it can decide to refer it to a public body such as the Hawks, NPA, SIU and Public Protector. Alternatively, AGSA does not have to refer if there is material irregularity. It can go through a process where recommendations are included in the audit report which then become binding.
2. If the recommendations are not implemented by the institution, then remedial action is recommended.
3. If remedial action is not implemented, a certificate of debt is issued.
Those are the three major changes – AGSA refers, recommends remedial action and if that is not implemented, a certificate of debt will be issued.
Looking at the definition of material irregularity, it is divided in three distinct sections. First, there must be irregularity which is non-compliance with the law. There is fraud, theft or breach of duty.
Secondly, material irregularity must be identified during the course of the audit. It cannot be from 10 or 20 years back. It must be during the normal course of the audit.
And lastly, there must be a material impact. That material impact must either be a material financial loss, misuse of material public resources, or harm to the public or to public institutions. Irregular expenditure must have resulted in a material loss. When looking at harm, this includes examples such as water pollution, the safety of people and misuse of resources.
Examples of material irregularity were provided:
• A supply chain open tender process which is meant to be competitive. The idea is to get the best service provider at the best price. But if the allocation was given to a service provider that is more expensive than another, the difference will then be regarded as a material loss. For instance, a water bottle can generally be bought in the market for R10.But if there was a tender process in a department and a water bottle was sold for R15, the R5 difference from what it could have been procured for will then be regarded as a material loss. If there is also suspected bribery, that would be regarded as material financial loss.
• If the board of a public entity is not executing its responsibilities or is not making decisions and taking the utmost care, it also meets the definition. We are aware of the VBS investigations that took place last year. There was a regulation that stated that there cannot be investments in mutual banks. But yet decisions were made without taking due care. And given that money was lost, it also meets the definition.
• With audit disclaimers, there is insufficient documentation. AGSA cannot audit the set of financial statements if there is lack of documentation to verify that money has been used for intended purpose. That can be an indication that there was substantial harm or potential loss was incurred.
Difference between material irregularity and irregularity
Irregularity is a contravention of the law. Material irregularity will also touch on fraud, theft, and duty not being adhered to. Irregularity is only reported when there was expenditure. If the procurement process is not followed, as soon as there is payments being made on that contract there will be irregular expenditure that is being incurred. That can be compared with material irregularity in terms of the new definition, where AGSA does not just look at the expenditure. AGSA also looks at fraud and breach of financial duty.
In terms of impact, with irregularity, there is none that has been specified in the PFMA. But the Public Audit Act now stated that there will be impact if there is likely material financial loss or there is actual financial loss, or there is misuse of material public resources or there is substantial fraud. But the impact is very specific and refined in the Public Audit Act.
When such expenditure is incurred, the amount paid in that year will be regarded as irregular expenditure within the financial statement. But with material irregularity, it considers both that expenditure as well as other social impacts. For example, if a tender for was issued and processes were not followed, and the best client was not selected, that will be regarded as irregular expenditure. The amount that has been paid during that financial year will be regarded as irregular expenditure, and must be disclosed in the financial statements. But in terms of material irregularity, the difference between the contract amount and what it could have been if correctly awarded, is regarded as a material loss.
PFMA and the role of Accounting Officials
The PFMA is very clear on the responsibilities of an accounting officer. The Public Audit Act is not trying to supersede or to take away from it. It is actually there to remind accounting officers of their responsibility. The PFMA stated that when there is potential non-compliance in irregularities, then there has to be a preliminary investigation. If applicable, the accounting officer must put steps in place to prevent any irregular expenditure or further loss. It must be reported to the police and there must be attempts to collect this money back. There must be steps in place to determine within a department or entity if it is necessary to recover the money. Therefore, the PFMA gives very specific steps stating that authorities cannot just condone irregularities. There must be processes to investigate it. Accountability must be ensured, and the money must be recovered.
With the material irregularity process, which came into effect on 1 April 2019, it is not a short process. It is going to take some time. AGSA started this year and has only identified 16 auditees for the 2018/19 financial year. In detecting those 16 auditees, AGSA went through a process of identifying material irregularities during the course of the audit. When AGSA identified them, the accounting officer was notified, and given 20 days to respond to the notification of the material irregularity. AGSA will then allow time for those recommendations to be implemented. Reasonable time must be allowed for the accounting officer to execute his or her responsibilities. If time given was six months, then after that period, AGSA will again follow up if the recommendations were implemented. If not implemented, then remedial action will be implemented on the accounting officer. Once remedial action has been recommended, when following up, the accounting officer will be given 20 days’ to respond to the steps that have been taken. Once AGSA gets the responses, they will be assessed. If they are insufficient, the accounting officer will be notified that AGSA is going to start the certificate of debt process. Once the certificate of debt starts, the entity will have the opportunity to do a verbal representation to the Material Irregularity Advisory Committee which is appointed by the Auditor General. Based on the Committee’s recommendation, the Auditor General will consider whether the certificate of debt is going to be issued or not. This entire process of communication, notification, receiving responses and giving opportunity to do verbal presentation, can easily take up to 18-19 months. For example, for this year if there are going to be certificates of debt, it is only going to happen in October 2020. That is to ensure that there is reasonable time, there is a sound process, and that everything is in place before getting to the certificate stage.
Discretion powers of the Auditor General
The Auditor General has the discretion to determine the nature or scope of audits. It also means that AGSA may refer certain material irregularities to public bodies and may make recommendations in the audit report. AGSA has also consulted with its oversight bodies and it was agreed to have certain criteria in phasing in the definition of 'material irregularity'. For 2018/19, AGSA looked at the audit outcomes of auditees for the last couple of years and it specifically considered those with negative audit outcomes, disqualifications, disclaimers and adverse opinions. AGSA considered the extent of irregular expenditure that those entities have incurred over the last couple of years. Therefore, based on that criteria AGSA identified 16 auditees.
For 2018/19, AGSA is only looking at the financial loss component of the definition. Therefore, in phasing in the amendments, it allowed AGSA as an organization to prepare itself, ensure that it is capacitated, ensure that training is being rolled out, there is necessary support and its getting the necessary skills. AGSA also made sure that their external partners are adequately prepared. In terms of the 16 auditees that were identified, AGSA went to them, explained the process, rolled it out, and also created awareness and capacity building. There are awareness sessions to ensure that everyone understands the changes, as well as the impact thereof. There is awareness amongst the accounting officers and to constitutional stakeholders.
Looking at oversight and monitoring, AGSA confirms that good and positive oversight has happened in the past. There were focused interviews, assessment on irregular and wasteful expenditure. There were site visits to entities, departments and SOEs. There were follow-up hearings to address audit findings, there were tickets for material accountability for poor governance, and also the resuscitation of the coordination of anticorruption agencies. Various legislation was also passed. Therefore, in terms of oversight a lot has happened. Monitoring and reporting can be enhanced. The majority of auditees perform interim audits. Departments and entities prepare interim financial statements. There is interim information that is available. AGSA is also looking at internal control failures. As previously mentioned, AGSA is doing the status-of-record review an early warning sign of where there are internal control failures and deficiencies. This can already be an indication that certain areas are not working and need to be focused on and enhanced.
Where resolutions and decisions are made, AGSA ensures that those decisions are being tracked throughly and there is actual implementation. The executive has an oversight role here. AGSA expects the minister to look at frequent reporting, quarterly reporting, financial and performance information. The minister should monitor, direct, support accountability and set the tone on compliance. As AGSA implements the amendments to the Public Audit Act, it expects ministers to support this process and demonstrate that there is seriousness and recommendations will be implemented. From an oversight view, if AGSA identifies material irregularities, they will be included in the audit report. AGSA will indicate that material irregularity was identified in the assessment and sufficient steps will be taken. Feedback will be given on that. If sufficient steps were not taken, AGSA will include recommendations. Then from the Portfolio Committee side, where there are recommendations in the audit report, Parliament is encouraged to take note of that and to engage the entities and follow-up on implementation. Legislatively, AGSA is required to give an annual progress report on material irregularities they have identified. That will be available to the Portfolio Committee to assess and follow up.
For material irregularities found in progress reports, in the investigation reports, the accounting officer must do investigations where there are irregularities in expenditure. There will be investigations that can be reviewed and followed. On disciplinary cases, the accounting officer must hold officials accountable that contravened the law. There should be discipline cases and reports. In recovery reports, AGSA identifies that there are amounts that should be recovered and those will also be available. In terms of financial management and financial reporting, there are interim reports, and financial health analysis reports. AGSA looks at performance information, strategic plans, annual performance plans, annual, quarterly and performance reports. On compliance there are budget reports, consequence reports, reports on unauthorized and wasteful expenditure, there are reports on management revenue and expenditure reports. AGSA also looks at human resources, there will be information on the use of consultants. And if AGSA looks at oversight risk, all departments have internal audit reports and there are audit committee reports. This is all the information that is available to the Portfolio Committee as well to gain insight and understanding and to see where the risk areas are and what the Committee can focus on.
Measures of Success
AGSA has observed that when the mandate is successfully implemented there is accountability. There will be robust financial management systems. Information will be available, and reporting will be available and will be accurate. Oversight and accountability will happen frequently. There will be accurate information. There will be appreciation for the role and necessity of holding people accountable. There should be commitment and ethical behaviour where officials do the right thing because it is right, and use resources for what they were intended for.
Ms R Lesoma (ANC) took note of the picture given on the trends over the past 10 years. Mr Rabonda had stated that AGSA has found issues when referring cases to different bodies such as the Public Protector. So she thought AGSA was going to touch on the amendments to the powers of the Auditor General. Whoever mismanaged the funds based on AGSA's findings, the AG implements remedial action. Are there examples that AGSA can say it has already started? Even with the Standing Committee on Public Accounts (SCOPA), although they invite departments to account, we have not seen any tangible action taken. AGSA says that if someone has done wrong, government means business in dealing with that. Of course, there is a grey area between the Executive and the Director General – specifically in terms of the accounting officer. Moving forward, we need to prioritize departments that are perpetual audit offenders so we can meet with them and see how best we can assist. This Committee does not only oversee DPSA, but the whole government as it were, because we have that responsibility as this Portfolio Committee.
Ms M Ntuli (ANC) wanted clarity on AGSA’s M&E systems. AGSA mentioned that it reports on audit outcomes, how swiftly do you move on such outcomes? There are a lot of municipalities that are under administration. How do we get to the gaps that AGSA mentioned? For me we should not be talking about lack of capacity after 25 years. As Auditor General what are the disciplinary measures that you can effect? It is clear that the trends that AGSA has mentioned here is what is jeopardising our government. AGSA said it condones the writing off of resources, please clarify. Does writing off mean that the taxpayers’ money has gone down the drain while the Auditor General is present? The Auditor General is a key roleplayer in the public service, other than waiting for the disclaimer how does AGSA assist departments not to incur disclaimers or audit findings? If you go on study tours to other countries, they will tell you that South Africa is well developed, and we do not have any hindrances because our government has all the systems. But the problem is how do you effect them?
Ms M Mokause (EFF) noted that AGSA said that there are a number of departments, provinces and municipalities with a huge chunk of irregular expenditure but it did not mention any. Is the culture of consequence management really enforced? AGSA mentioned that it only gives recommendations to a department or municipality, but it cannot really enforce accountability. Does that render your institution somehow useless? If AGSA can tell us how they are useful. You mention that you only do audits, not investigations. When picking up irregularities now through the audit has AGSA's mandate actually expanded to advising law enforcement to investigate or charge a certain department?
Ms M Clarke (DA) said that the Auditor General can only do so much up to a point. Then government should take responsibility and put actions in place to fix this. This report shows there were 27% unqualified audits with no findings in 2014/15 which drops dramatically to 17% in 2017/8. Ten percent is a huge drop. She would really like to know how many cases have actually been referred to these external bodies. What remedial action has been taken and what outcomes have there been to fix these problems on government’s side as government must play its role? On the certificate of debt and those that receive them, what consequences will politicians be putting in place so there is oversight over these departments? AGSA has given us a report which is very informative, but we need to also start taking responsibility to action things. She is from Gauteng and it is burning at the moment and there is absolutely no consequences being taken for what is happening in this country. She would really like to see that there are progressive changes from government and legislators that are followed through.
Ms C Motsepe (EFF) asked about unauthorized expenditure. How does AGSA retrieve the huge amounts of money lost? There is much underspending as well which means a huge loss as it is redirected to another department to be used properly.
Dr L Schreiber (DA) noted that the things that we have become used to in South Africa are really disturbing. One slide shows the blatant disregard for controls, compliance and Auditor General recommendations. That is something that should be front page news every day until is stops. But South Africa has become used to this. An example of that is the irregular expenditure increase that was not dealt with through the accountability process. It has accumulated to R161 billion nationally and provincially and R71 billion at local government level. It is such an overwhelming situation. He asked if the amendments to the Public Audit Act, allow remedial action to be retroactively enforced. Or are we simply allowing people to get away with the R161 billion and the R71 billion? It is understandable that that it will take time, but we do not have much time. In AGSA's phased roll out this is going to be the main focus.
We are all grateful in South Africa to have an Auditor General of the stature that we do. People really do respect the auditing capability and capacity that South Africa has. We should not take that for granted. There are many of our peers who wish they had this capacity. So that is a good thing. But the amendment of the Act is surely a recognition that having a competent auditor general is not enough. Especially when there is no accountability, and nothing ever happens as a result of the recommendations and findings of the Auditor General. The ball is in AGSA's court now. They have been given these extra powers, please use them well, efficiently, and quickly. His question then is on the retroactivity of going back to recover and hold people accountable.
For the Committee, this is a very sobering presentation because as is the case with the Public Service Commission, we have fine people and institutions producing information and reports, and insights. The ball is in our court as well. We have to acknowledge the failure of Parliament. This Committee which oversees the public service must act on all the information that we are given. He agreed with Ms Lesoma that we need to identify those departments that are serial offenders and act on them. We know the Auditor General is going to be acting more strongly going forward. But nothing prohibits this Committee from taking this information and really drawing a line in the sand – making it clear that this build-up of irregular expenditure and wasted money not spent on the people will not continue. We should really take that message on as a Committee.
Inkosi R Cebekhulu (IFP) noted with concern that the AGSA report paints a dire picture of what is happening in the country. He asked AGSA to speak about the collusion between service providers, staff and politicians in the industries of the state. How does the Auditor General function when such things are taking place? He knows AGSA does not investigate and that there are government agencies that handle that. But it is very painful to see that a lot of money goes to certain individuals and groups instead of being used for its proper purpose. It is a concern.
Ms Clarke proposed a recommendation that the Committee should receive a report of all the serial offenders. The Committee should work through that report and enforce some real consequence management to those departments behaving in such a manner.
Ms Myburgh responded that the Auditor General’s mandate is derived from the Constitution and the Public Audit Act. AGSA is clearly there to audit, express opinion on a set of financial statements, conclude on compliance and express an opinion or conclude on performance information. AGSA is not in a position, and it is not part of its mandate to hold people accountable. The frustrations are understandable but from the auditor’s side that is not AGSA's mandate. There are different role players within government given specific roles and responsibilities. Obviously, now with an expanded mandate there is an element of holding people accountable that is coming in. That will come in the form of a certificate of debt and the remedial actions. But what AGSA has been doing over the last couple of years is to be visible. When AGSA starts the process, it will ensure that there is a proper understanding of the audit, will identify risks, will perform a status of records review - that is an early warning exercise to identify those components and areas where there could be potentially breaches, internal controls and deficiencies. AGSA will communicate that. It has quarterly meetings with accounting officers where these issues are discussed. The audit teams on the ground will in most instances hold weekly or bi-weekly meetings with the auditee to bring the findings to their attention. AGSA also has regular meetings with the executive authorities, ministers and we will also bring the weaknesses and deficiencies to their attention. AGSA's managing report and auditing reports are available and also reports to Portfolio Committees. On an annual basis AGSA will issue the general report, as well as media statements. The information is out there. AGSA cannot go and charge people, even with the new amendments to the Public Audit Act. Its powers to holding people accountable will go as far as issuing a certificate of debt, recommending remedial action and submitting an opinion. The Auditor General is not responsible for that and there are limitation to what it can do. On monitoring and evaluation, once again AGSA tracks the action plans. It will review the action plans to determine whether it is sufficient to address the findings there. It will monitor but cannot enforce implementation thereof. There are different role players that is responsible for monitoring and evaluation. When looking at unauthorized expenditure there is a question around the recovery of funds thereof. Once again, AGSA is not responsible for recovery. AGSA will recommend accounting offices to carry out an investigation and correct the necessary. Accounting offices, ministers, Portfolio Committees can act on that information. Since the act came into effect on the 1st April 2019, 16 auditees have been identified and informed that there were material irregularities. It was brought to the accounting officer's attention and AGSA has received responses in some instances. Financial statements were submitted late so we have not signed the audit report as of yet. But material irregularities have been issued and communicated and AGSA is getting responses back. That will find its way in the 2018/19 audit report and AGSA will follow up on the recommendations. AGSA is still in that initial stage of communication, finalization of the audits reports, and the referrals to the public bodies. It is a bit early now to state how many cases been referred, what the success rate is, what has been collected and the feedback thereof. AGSA is still in the early stages of the first round of the irregularities. With regards to serial offenders AGSA will be able to make the list available. It can be made available from the general report of last year.
Mr Rabonda discussed instances where amendments can be retrospectively applied. The amendments are effective in 2018/19,which means it only applies for audits performed from 1 April 2019. So AGSA cannot therefore take findings from the previous years. Unless, there is an ongoing wastage of public funds in the current year. For example, if the irregularity occurred 10 years ago, the contract is still currently ongoing and the public is losing money, AGSA can use that as a basis for an inquiry and go through the process in the current year. For issues that have occurred in the past, other processes can deal with them outside the Auditor General process. With regards to the question of condoning irregular expenditure, when there is non-compliance with legislation, there is disciplinary action incurred. AGSA reports on that. According to the public management act, the accounting officer must investigate that. Once that has occurred and the investigation finds that there were losses incurred, they cannot go through the process of condonation. You cannot condone an act that leads to a loss for the state. What they must do is start the process of recovering the loss. Which means they must transfer the money to recoverables and follow the process. There are provisions within treasury regulations which give guidance on recovery. It can only be condoned in cases where the loss is irrecoverable after following all the legal processes or if the person passes on, or the person is declared insolvent. Then it is declared irrecoverable, and that is a write off. However if an investigation is carried out, and the conclusion is that the services that were rendered at the right prices and there was loss to the state, you can state that the person who committed the loss was doing so in good faith - and they can go for the route of condonation. However, to ensure that the accountant is not the player or the referee in the process, national treasury has defined that it is the only relevant authority to condone that. Submissions for condonation must be made to treasury.
On whether the culture of accountability regards the Auditor General useless, as previously indicated, AGSA is just one part of the puzzle in this framework of accountability. AGSA unearths information, make them public, reports on them, and engages with the relevant bodies. AGSA audits and reports, that is its mandate. Therefore, AGSA is still very much useful. With regards tithe audit versus investigation argument, on the very initial slides, it was noted that AGSA has two types of mandates. These are the compulsory mandate and the discretionary mandate. Section 20 is about the compulsory mandate, which stated that on an annual basis AGSA must audit. That audit is not an investigation. What will come out of that are opinions and not factual findings that that there is fraud. However, under Section 5 is the discretionary mandate. It stated that the Auditor General has the discretion to do investigations. There are policies in place that gives effect to section 5 and stated what type of investigations can be done. It also talks to who can request an investigation. But since AGSA's primary mandate is to audit, if focus is placed on investigations, the audit function is going to collapse. But if there are requests for investigation, AGSA can refer them to public protector and copy them in that communication.
Mr Rabonda replied to Ms Motsepe question on how unauthorized expenditure is retrieved. It is similar to irregular expenditure. When a department has overspent their budget or spent money for the wrong purposes, it becomes unauthorized expenditure which we report. The accounting officer is required to investigate who was responsible for that and whether there are justifiable reasons for why it happened. That is when AGSA makes a submission to Treasury. National Treasury also does not have the power to approve that, because they are not the first authority to approve the budget. It is approved by the legislature or municipal council and it is they who must decide whether to approve the unauthorized expenditure or not. A justifiable process must be followed on that.
Ms M Marongwa, Senior Manager: AGSA, replied about collusion between service providers, management or political leaders. AGSA is mandated to audit and not to investigate fraud. When it comes to tip offs, allegations and whistle blowers, AGSA has the mandate to assess the risks and impact on the fair representation of financial statements. But AGSA will not do an investigation. There are policies and processes in place to inform the relevant stakeholders. That includes management, accounting authorities, executive authorities and audit committee. In terms of our mandate AGSA does not investigate fraud.
Ms Ntuli noted that this is the Sixth Parliament and if the Committee is in a position to pass policies to make the Auditor General more effective, let it be so. Irregular expenditure and wasteful expenditure should be abolished from government records. The Auditor General cannot be standing by and waiting for irregularities to occur. Auditor General, you are a key role player, but you cannot investigate. But if you have picked up something, how long do you wait for the investigation to be finished? If there is an investigation that you have ordered, you should be monitoring it. The systems are there, but they are not effected properly. What can be changed to make the system more effective? We need to have a cure. The Committee needs to approach departments that are not doing well. Let the Committee investigate why they are not doing well and determine how they can be assisted.
Ms Myburgh responded that in accordance with the new Public Audit Act, typically AGSA will make recommendations for the accounting officer to investigate, stop the financial loss and recover funds. AGSA will allow reasonable time but it should not extend more than six months. AGSA will then follow up and if recommendations have not been implemented and missioned, then it will go into remedial action. Then, it will go into a certificate of debt unless sufficient steps have been taken by the accounting officer to collect back the money. She is sure the amendments are enhancing accountability and enforcing compliance where there was material irregularity. If there is material financial loss, there are remedies to ensure investigations. And also to ensure that the people accountable are identified and that the money is collected back.
Statistics South Africa (Stats SA) briefing
Mr Risenga Maluleke, Statistician-General, gave the briefing.
Role Players in the Statistical Environment
Stats SA is currently in demand by so many Portfolio Committees. The work of Stats SA has a three-pronged approach. The Statistician General is appointed and removed by the President. The Statistician General who is the CEO, implements the Act and ensures that Stats SA remains independent at all times. The minister also approves and manages the work programme of Stats SA. We also have a council that advises both the minister and the Statistician-General, unlike other institutions that have a board. In our case, the council is only in an advisory role and it can differ with Stats SA at any given moment. Stats SA deals with the “how” in terms of how to measure. The “what, in terms of what needs to be addressed is a policy space that is entirely not ours. When we say that we are responding to the triple challenge of unemployment, poverty and inequality, it is because the country elevates that. There are other processes like the MTSF that raise issues of economic growth and other areas to respond to this triple challenge.
Importance of Statistics
Stats SA stated that there can never be any credible planning, monitoring and evaluation without statistics. Statistics plays a critical role in illuminating policy choices, programme design, monitoring of policies and programmes, and the impact of those policies. But Stats SA does not deal with the issue of the impact. The impact in the form of the changes of the life circumstances is not our role, it is the role of the HSRC and other institutions that deal with the policy space. As a country our centrepiece is the National Development Plan (NDP). Other policies are the SADC protocols, EU Agenda 2063, the SDGs, the MTSF (sector plans). Stats SA seeks to find an interface in relation to the indicators, at the SDG, local and at the thematic indicator level.
Integrated Indicator Framework
We also have what we call the integrated indicator framework. This integrated indicator framework seeks to pull in the SGDs, the NDP, and of course Agenda 2063 for purposes of making it easier in future. Whenever Stats SA reports on the NDP, it needs certain indicators. Agenda 2063 needs certain indicators. And of course, the SDGs need indicators. Stats SA is currently in the process of finalizing our first reporting to the United Nations following our 2017 UN baseline report. There are competing indicators and we want to harmonize them for purposes of making it easier. We want to ensure that with the integrated indicator framework we mitigate the existence of contradictory estimates in the public domain. This is since some of these estimates do not sit with us, especially those that are harvested from administrative records. Stats SA wants to ensure that we do not have contradictory estimates and it is critical that that is understood. Our role in statistics is to measure and estimate. Stats SA estimates are very interesting because they must be closest to whatever we are relating to.
South African Quality Assessment Framework (SAQAF)
One of the things that Stats SA does is to ensure that there is no duplication. We have the South African Quality Assessment Framework (SAQAF) that Stats SA is responsible for. We take the products from different government departments. Crime statistics from the police will be used as an example. Crime statistics are now taken through our SAQAF framework. When they are taken through SAQAF, we can safely say that crime statistics in the country are actually official and I have signed that statement. They will be released by the police as official statistics as delegated by the Statistician General. But discussions are ongoing that in future when statistics are collected, as long as they meet quality standards, they must be released by the Statistician General. We have seen previously that they were released by the minister in parliament. Stats SA started advising that they cannot be classified as official statistics. This is because a minister comes from a political party and different parties will want to deal with matters on a political narrative basis. Having said that, the role of official statistics is to be available to everyone in the public at all times. This is because statistics are a public good.
Availability of Stats SA to Political Parties
Stats SA is available even to political parties. We have addressed the ANC at almost all of their gatherings at national and provincial level. The EFF invited Stats SA during their induction to address them. But we have decided not to wait for political parties to invite us. Stats SA is making contacts with other political parties stating that we are available. This is because these statistics must be used by every political party in planning and in the ability to take a debate to the public space. Otherwise if Stats SA cannot reach other political parties with statistics, we will be seen to be the remit of the government and that cannot be appropriate.
Process of Sustainable Development Goals (SDGs)
Stats SA coordinates the input on SDGs. We have the National Coordinating Committee that undertakes all the processes for purposes of sanitizing the numbers. This is because when reporting on SDGs, we do not only use official statistics. This is the route that Stats SA has taken save for the current SDGs that we will be taking to the United Nations later this month. The SDG Progress Report will be presented by Stats SA and because those numbers are no longer embargoed, they will be launched by our minister at the United Nations. The numbers are already in the public domain.
At the beginning of 2017 we had the Cape Town Global Action Plan for Sustainable Development Data that relates to capacitating statistics to not only focus on statistical agencies such as Stats SA. We should look at the comprehensive system of national statistics. Otherwise if one looks at statistics agencies in South Africa alone, we will make the mistake of excluding lots of data, particularly data that in government we can readily harvest.
Data in the Private Sector
There is also data in the private sector that relates to and could make this country work better. The biggest risk with data in the private sector is that, if a company is sitting on large volumes of data, and for whatever reason the company fails, they can close down with information that is critical for future generations to use. Stats SA is looking at those possibilities.
Stats SA has an international footprint which advises and positions South Africa in relation to BRICS and the United Nations Statistics Commission. We also attend expert groupings from time to time. At a continental level, Stats SA sit at a meeting of statisticians both at a SADC level as well as at an African level. Stats SA places an active role and are among the top five sought after agencies in the world. When there is a matter to be discussed on statistics, Stats SA is among those that are sort after to express opinions. When there is an international meeting, the world feels it cannot express certain opinions without Stats SA being there.
Production of Statistics
Stats SA produce statistics almost on a daily basis with more that 250 releases per annum. A few days ago, Stats SA released the non-financial census of municipalities and can now safely talk about service delivery and appointments. For example, in South Africa, especially in the North West and Free State, women are represented more than 50% in the form of mayors. But in KwaZulu Natal, Gauteng and the Western Cape they are actually in their lowest majority at local government level. Abolition facilities in the form of bucket toilets show a decrease, but it is not rooted out completely because of the proliferation of informal settlements. Stats SA also released the latest GDP figures yesterday.
Stats SA follows persons from birth to death. When they are born, go to school and work, Stats SA is there to document that. Even when they die Stats SA will be there as we have to tell South Africans what is taking the lives of citizens. Stats SA goes to Home Affairs, receives the microfilm for BC63 forms, as well as the death certificates so that we can talk about the primary and secondary causes of death. It helps Stats SA understand our society.
As of mid 2019 there are about 58,780,000 persons in South Africa. We have 1,2 million births with a fertility rate of 2,32 children per mother. That is live births per mother. Births are declining in the Western Cape and Gauteng. In Gauteng, it is less than 2, at 1.99 live births per woman. That means Gauteng at some stage might not be able to replace its population. It relies on the fact that there are a lot of people from Limpopo who are moving to the province. In the Western Cape, the rate is at about 2 live births per mother, meaning that this province might also not be able to replace its population. The only benefit is that it receives people from the Eastern Cape. People from the Eastern Cape are moving with their children to the Western Cape.
Foreign Nationals in South Africa
Contrary to popular narrative there are not 11 or 15 million foreign nationals in South Africa. It is critical to share this with the Portfolio Committee because it relates to the current narrative that is going on in the country which has sometimes led to the destruction of property. If there were 11 or 15 million foreign nationals in the country, Stats SA would see them trying to access schooling and health facilities. The illegality would catch up with them because one needs a birth certificate to send one's child to school. In addition, Stats SA would be able to track them when they die. Stats SA has tracked them from 1996. In 1998, there were 800 000 people who were non-South African born in the country and it was reflected in the census. In the 2001 census, there were about 1 million and in the 2011 census, there were 2.2 million. Stats SA’s estimate as of now is 3.6 million persons. From that number Stats SA can delineate how many are employed and in which categories.
Structure of South Africa’s Population
About 30% of the population – 28.8% to be exact – accounts for 17 million children aged 0-14 years. Young people aged 15 – 34 years are about 20.6 million which amounts to about 35%. Thus we can see that more than 60% of the population in South Africa is young. About 27% of people are aged 35-59 years and about 9% of the populace is 60 years old and older.
Since 2002 Stats SA has been tracking housing. The number of formal dwellings has increased from 8 to 13.5 million units. Informal housing is also increasing. In 2002, there were 1.5 million informal units, and now it is 2.2 million. Traditional housing is actually declining which indicates that people are moving to formal housing. Informal housing is largely in Gauteng, Western Cape, and the North West. Gauteng and the Western Cape is more urbanized. The trend is that the poor always follow the rich so that they can provide their labour to them. The poor will move next to city centres so that they can make their services available. The movements from Eastern to Western Europe is a sign of that. The movement of young Africans to Europe, where they even risk the Mediterranean, is another sign of that.
In 2002, South Africa was sitting at 85% of households with access to piped tap water. The country is currently sitting at 89%. But the challenge is not water connections, it is the functionality. On functionality, 56% of the population have indicated that they have suffered interruptions of at least two days.
Almost every province is above the national average in terms of connection to electricity. Provinces such as the North West are declining a bit from where they were above the national average to below it. This is due to the informal settlements discussed earlier. In the Western Cape, electricity connections are higher, but it is declining. That is also because of the informal settlements being established there. And the same phenomenon is observable in Gauteng which is declining sharply below the national average. The Eastern Cape is struggling. The province started from a low base and is now reaching slightly above the national average.
Almost all provinces are above the national average with improved sanitation. The Eastern Cape which started from a low base has moved to a higher base. Limpopo started from a very low base and is still below the national average.
The NDP says that we measure the lower bound poverty line and Stats SA is stating that 40% of people in South Africa are poor. Twenty-five percent of the people in South Africa are actually below the poverty line. These are people that are actually at risk of going hungry. Out of the 58 million, Stats SA is saying that 15 million are at risk. But using 2015 statistics, slightly about 12 million are at a risk of being hungry. We are referring to 2015 because beyond that year Stats SA has not done any poverty line measurement due to a lack of funds. Stats SA is stating that poverty is actually starting to rise coming out of 2011 and can only speak about these results until about 2015. It is rising, and not even Stats SA can tell why. If by 2030, South Africa intends to move from 40% to 0% in terms of poverty, the challenge will be big.
Looking at headcount poverty, Msinga Municipality was the poorest coming out of 2001. We can see that Msinga is actually decreasing its headcount poverty and has even overtaken Intsika Yethu Municipality. Looking at the bubbles in the slide, the red colour represents Cape Town. The big red bubble is dropping. It means that the intensity of poverty is decreasing for those who feel poverty in the Western Cape, particularly in the City of Cape Town. The feeling of poverty is actually less. The more the bubbles move in a straight line, it means poverty is decreasing. But when the bubbles start dropping down it means that those who feel poverty, the intensity, they feel it less. And we see it more in the City of Cape Town than anywhere else in the country. Other provinces are just decreasing poverty, but not the intensity. Stats SA also stated that what drives poverty is unemployment and lack of education. Those are the biggest contributors. If South Africa cannot address unemployment people will still remain poor. And they rely on education to net a better job.
In terms of income at the top are whites earning about R444 000 pa on average. They spend about R350 000 and have a gap of about R100 000 of disposable income. Next are the Indians and Asians earning about R270 000 on average. They spread about R195 000 and have a gap of about R70 - R80 000 of disposable income. Following them are the coloureds who earn R172 000 on average. They spend about R124 000 on average and have about R50 000 of disposable income. At the bottom black Africans are earning R92 000 spend R67 000 and have about R25 000 in disposable income. So how people wiggle out of poverty is still strongly related to their population group in South Africa. What the numbers are confirming is not new, we already know that as a country.
Only the Western Cape and Gauteng are above the national average with the larger proportion of income coming from salaries. In the other provinces, the larger proportion of income does not come from salaries. In KwaZulu Natal and Limpopo, salaries are very little. Limpopo is beaten by the Eastern Cape in dependency on grants. In the Eastern Cape, remittances represent 35% as the main source of income. Limpopo and KwaZulu Natal rely more on grants. Even though grants are not a sustainable form of livelihood, they are mitigating a lot of people from being vulnerable to hunger. So that 25% or 12 million people discussed earlier are actually being protected from hunger.
Stats SA stated that the unemployment rate is 29% as per the Quarter 2 of 2019. That figure represents 6.7 million persons. Out of the 6.7 million persons, there are 2.7 million persons who were discouraged work seekers, plus another 800 000 who did not take up employment for whatever reason. Therefore, South Africa is sitting with 10 2 million which represents a 38.5% unemployment rate.
The Eastern Cape has the highest unemployment rate in the country, followed by Mpumalanga, and then the Free State. Generally, rural provinces have challenges of unemployment. Below the national average is KwaZulu Natal, Western Cape and Limpopo.
For the expanded definition of unemployed, in the Western Cape there are very few discouraged work seekers. There is generally employment in the Western Cape that is why discouraged work seeking people are fewer. When looking at the expanded definition, unemployment jumps in Limpopo as there are more discouraged worker seekers in Limpopo. The Eastern Cape and North West lead the pack in terms of discouraged work seekers. They are followed by the Northern Cape and then KwaZulu Natal. Rural provinces still have a lot of discouraged work seekers
For young people aged 15-24 years, there are 10.2 million unemployed. In that number, 3.3 million lack education and training. Females are a lot higher than the males in all the circumstances.
There are some young people of 20-21 years old still in primary school. In addition, there are those who are 24 years old who are still at secondary school. For the girl child, 14.5% say that they are not in school because of family commitments. But for boy child, the percentage is 0.2%. Some girls are also looking after children of their own. In terms of education, the boys continue to say it is not important. But the girls say they want to go to school but are not being given the opportunity.
Quarter 1 of 2019, there was a slump of -3.2%. Stats SA can safely state that the economy performed poorly largely in mining and manufacturing. Manufacturing’s contribution to this was -1.1% and mining was -0.8%. These were the biggest contributors to the lack of growth in Quarter 1. In addition, manufacturing and mining depend on electricity and there were a lot of power outages in Quarter 1 due to load shedding.
Yesterday, Stats SA released the Quarter 2 economic statistics with a positive growth in the economy of 3.1%. This time mining came back very strong, especially in iron ore, manganese and coal. Further, in Quarter 2 there was supply of electricity to the economy. Mining was followed by finance and real estate which contributed about 0.9%. Agriculture, construction and transport did not contribute much. Whatever happens in the economy can be translated or transacted in monetary terms - we can follow this quarterly. For example, the burning and looting in Gauteng at some stage will show in the economy.
Ranking of Industries
There were eight recessions in South Africa since 1961. Two of them occurred in recent times, in 2008/9 and in 2018. Looking at the structure of the economy, manufacturing was strongest in 1994 and it is now fourth. It has been overtaken by trade and finance. Finance is now the strongest while trade is third. When it comes to employment, manufacturing is where we get semi-skilled workers. Unskilled workers also enter the economy in this industry but they usually enter in construction and agriculture. Finance is where we usually find the most advanced workers and it is the strongest sector now in terms of nominal GDP. Agriculture is the smallest in the economy.
Gauteng is the biggest accounting for about a third of the economy. It is followed by KwaZulu Natal at 16% and then the Western Cape at 14%. Within Gauteng, finance is the biggest, followed by government and then manufacturing. In rural provinces there is not much finance. Government and services, even when it has the largest share, does not create as much employment. Although trade has a lower share of nominal GDP, it produces more employment. As for mining, its share of nominal GDP is bigger than the jobs it creates. For agriculture, its smaller in terms of nominal GDP but it creates more employment.
The Value of Statistics
We need figures. Statistics can be used for evidence and for purposes of planning better. When Stats SA looks at statistics, they are used n terms of its quality assessment. There are poor statistics, questionable statistics, acceptable statistics and when they reach the level of quality, they are classified as official statistics.
Stats SA wants numbers to have integrity and no political influence, or sectoral influence by businesspeople or traditional leaders. Numbers must be accurate and be relevant. They must be easy to interpret. They must must be methodologically sound, and their methods made public. They must be comparable and coherent. They must meet certain requirements and of course timelines and they must be accessible.
Ms Lesoma asked if this briefing has been made to Cabinet. It would also assist them when it comes to planning as they must respond to these issues as it were.
Ms Ntuli said that for government to run the country, there should be statistics. It is safe to say that the Statistician General has gone the extra mile in presenting to political parties and to all departments. From your presentation, it is understood that it is not for you to overcome poverty, but to inform the country about it. You mentioned that you are going to present to the United Nations. I hope that the United Nations will use our own statistics for our country. The fact that you are going door to door, sector to sector with the stats you are producing, means we can change the lives of South Africans. Your diagnosis is very important as we cannot treat anyone without knowing the cause of the sickness. For me statistics are very important and should be used. Let us devise a strategy on how to solve the problems that you have found for the good of our country.
Ms Motsepe noted that the quality presentation was very educational. She noted that Limpopo has got a low percentage of ventilated toilets compared to other provinces. Was the provincial government conscientised about that? Are there links between birth being the main driver of population growth, and female youth aged 15-24 that are not in employment or education or training?
Mr S Malatsi (DA) asked about the level of engagement that Stats SA has with the three different spheres of government at the budget planning phase. Allocation of resources is informed by the empirical evidence that emerges out of the stats in key areas. He asked if Stats SA has done work in tracking and measuring the female dropout rate at high school level as a result of teenage pregnancy and if this contributes to the statistics on the retention levels of women at different levels of education, particularly the secondary phase.
Ms Mokause asks for more clarity on what is happening in provinces. In the Northern Cape, Stats SA is not so visible and you do not have a formal office there but are sharing an office with Social Development. That is a concern for Stats SA administration and capacity. On slide 16, there is reduction in the population in the 35-59 year age group, what could be the cause of the high death rate in that age bracket?
Mr Diego Iturralde, Chief Director: Demographics, Stats SA, replied about the age structure of the country, saying it shows a history about population dynamics over time. The population dynamics of South Africa are to a great extent shaped by the HIV epidemic which had its epicentre throughout the years of 1996 to 2006. During this time, life expectancy dropped almost to 50 years of age. Fertility rate levels also began to drop as women were unhealthier. It is only round 2006, when antiviral treatment was introduced that women became healthier. Life expectancy increased to the level we see today of 65 years of age. We saw a very temporary recovery in the total fertility rate between the years of 2007 to 2012. There was an increase in fertility rates before that decline, which has been ongoing since the 60s. Infertility resumed its natural course since approximately 2014. So that dip that we see in the age structure really tells a story of changing demographic patterns in the past and shifted through the age structure of the population of the time. If we fast forward from 2019 to 2030 and 2040, we will continue to see this dip, but it will shift further and further to the right.
Mr Maluleke continued that South Africans are generally living longer now with access to antiretrovirals. We peaked in 2006 with the number of deaths per annum at 660 000. Now we are sitting at about 463 142. That is a serious decline. Life expectancy is improving and is a lot higher in Gauteng and Western Cape with women living much longer. There is a five-year gap in Gauteng and Western Cape, the most urbanized provinces. Whereas in the rural provinces, like the Eastern Cape and Limpopo, there is a year’s gap between women and men. But it is in favour of women, who continue to live longer. We still have more boy children with a 102 boys born for every 100 girls.
In reply to Ms Mokause, it is a problem in other offices as well. In one of Stats SA’s offices in the Northern Cape, our offices are tucked behind a bottle store. Stats SA has two challenges. First, in some of the smaller towns, Stats SA relies on Public Works for office space. It is therefore difficult to get space. Secondly, there are issues with the branding of government offices. Stats SA has to choose whether to use its money for massive branding campaigns in the country or to produce the basic statistics. Stats SA has decided that without money it will rather focus on basic statistics. But now, Stats SA is going to be conducting a census, and wants to use the census money because the census has to be public. People must know where Stats SA is and the field workers must be branded.
Obviously, Stats SA shares developments with Cabinet. We address different Cabinet committees from time to time. For example, yesterday we addressed the Presidential Inter-Ministerial Committee on Service Delivery was chaired by the Deputy President. And they actually demanded that Stats SA returns. With the 250 releases per year, there is a lot of information that we make available. Stats SA goes out to the provinces and we would like to rely on political parties in this Portfolio Committee. We also encourage political parties to invite us. StatsSA wants to dispel any notion of bias. Statistics remains a public good and we would like to reach out to every member in society. When we conduct the census, we will be engaging all political parties to encourage their members. In some instances, in the past, some political parties have said no, but Stats SA wants to be involved, especially at local level. Stats SA must remain independent and cannot outsource its core business.
Stats SA’s mandate sits with Parliament. Parliament is the one that gives Stats SA the law. What Stats SA needs to do is to protect the functioning of official statistics. It must be done in line with the United Nations fundamental principles of official statistics, as well as the African Charter on statistics. They dictate that the statistics office must always be independent from planning.
In reply to Ms Motsepe, Stats SA addresses all provinces and reaches out to all structures. For example, in the North West, in one year alone Stats SA addressed their executive council four times and it went 12 times for their different ANC structures. But it is not the same, it depends on each province. With regards to Limpopo, Stats SA addressed them recently at their economic development summit and shared with them statistics. In Quarter 1 of 2019, Stats SA had 513 000 hits on its website and there were 101 000 downloads. With yesterday’s GDP statistics release, for the first time ever, Stats SA’s website almost crashed due to demand. There is so much demand for the statistics that Stats SA has to change its IT infrastructure to respond better.
On linking employment, education and training to the age of the mother when giving birth, Stats SA has not done that. Stats SA must be able to have representative samples to be able to say with certainty. With statistics one must be able to say with certainty. Stats SA gets data from Home Affairs for number of children registered. Births registered by Home Affairs show the peak age for mothers of those children is usually 22/23 years and for fathers it is 25/26 years. There are cases of children as young as 13/14 years who have given birth and have gone to register at Home Affairs. That data is available but on making the link to secondary education, Stats SA has not done that.
Stats SA does reach the three spheres of government but not so much at local municipality level but rather at district municipality level. Stats SA has not reached all the local municipalities. If Stats SA cannot reach areas for functionality reasons it will ask the district municipality to supply them with the data.
In terms of tracking girls and teenage pregnancies, Stats SA does not do that. This because Stats SA does not do targeting. Official statistics are not supposed to target because Stats SA has to maintain the confidentiality and the identities of the people it collects information from. Once people know that Stats SA tracks and targets them, they will withhold information. Confidentiality is very critical in how Stats SA does its work and therefore targeting and tracking cannot be possible. Stats SA does of course do that when collecting data for the quarterly labour force survey, and when dealing with our poverty numbers. There are people that Stats SA employs to track and estimate people in long term unemployment. But even then, Stats SA takes away their identifiers.
Ms Mokause followed up on a point raised earlier. The Committee might want to follow up on the non-functionality of Stats SA in some regions in certain provinces. You are well aware that statistics influence a variety of issues within government. We cannot ignore capacitating regions and provinces otherwise it means we are not going to have accurate statistics. Stats SA is an institution we support. We support your budget and would like to see that the money is going to where it is supposed to be going. We appeal that you capacitate your regions and provinces. We do not want to have a situation where you say that your regional office is not even visible, that it is behind a bottle store. We want communities to be aware of your work, so let us just rectify that.
Mr Maluleke responded that Stats SA’s challenges with finances are dire. And this Committee is seized with this. Stats SA will address visibility during the census using the census budget. Stats SA management may have to decide whether to provide basic statistics or do only certain things. But as long as Stats SA does not get money from the state, it will have to make those choices. However, the message is received.
Minutes were adopted.
The Chair adjourned the meeting.