ATC140313: Report of the Committee on the Auditor-General on Proposals for the remuneration of the Auditor-General of South Africa

Appointment of the Auditor General

Report of the Committee on the Auditor-General on Proposals for the remuneration of the Auditor-General of South Africa

1. Background

1.1 Section 193(4) of the Constitution, 1996 (hereinafter the “Constitution”) provides, amongst others, that the President, on recommendation of the National Assembly, must appoint the Auditor-General. On 11 September 2013, the National Assembly [Third Session, Fourth Parliament] adopted a resolution recommending that Mr Thembekile Kimi Makwetu (hereinafter the “nominee”) be appointed as Auditor-General in accordance with section 193(5 )( b)(i) of the Constitution.

1.2 This report contains the recommendations of the Standing Committee on the Auditor-General (hereinafter the “Committee”) to the President pertaining to the intended conditions of employment, including the salary, allowances and other benefits of the nominee in terms of section 7 of the Public Audit Act 25 of 2004 (hereinafter the “Public Audit Act”).

2. Determination of remuneration

2.1 The relevant provisions of section 7 of the Public Audit Act read as follows:

7. Conditions of employment. —(1) The oversight mechanism must consult the person recommended in terms of section 193 of the Constitution for appointment as Auditor-General and make recommendations to the President for the determination of the conditions of employment of that person, including an appropriate salary, allowances and other benefits.

(2 ) The salary, allowances and other benefits of a person appointed as Auditor-General must—

(a) take into account the knowledge and experience of the prospective incumbent;

(b ) be substantially the same as those of the top echelon of the judiciary; and

(c) be paid from the funds of the Auditor-General.

(3) The conditions of employment determined in terms of subsection (1) may not be altered by the President during the incumbent’s term of office without the incumbent’s written consent or to the incumbent’s detriment.

2.2 Section 189 of the Constitution provides that the Auditor-General must be appointed for a fixed, non-renewable term of between five and ten years.

2.3 The Committee took into account the finding in the Report of the Ad Hoc Committee on the Appointment of the Auditor-General, dated 10 September 2013 ( ATC, 10 September 2013, p. 3377 ) that the nominee showed:

· knowledge and understanding of management of public finances and auditing in the public administration;

· displayed strong leadership qualities;

· good interpersonal skills; and

· high integrity.

2.4 An updated benchmark exercise was undertaken by Alexander Forbes and used as a basis for the determination of the salary, allowances and benefits of the current Auditor-General.

2.5 Upon scrutiny, the Committee found that the calculation from Alexander Forbes was flawed based on the following reasons:

· Wrong inclusion of R60 000 p/m taken as equivalent to the rental amount of the house occupied by Chief Justice in Bishopscourt . Upon enquiry with the Department of Justice, the Committee found that there is no house in Bishopscourt occupied by Chief Justice. The Committee established that the housing allowance for the Chief Justice is regulated in terms of the Ministerial Handbook and hence the R60 000 p/m is not applicable. Thus, the Committee resolved to apply the appropriate amount stipulated in the Ministerial Handbook.

· Alexander Forbs use basic salary of R2 525 200 per annum paid to Chief Justice. However, the Committee could not establish such an amount upon reading a letter sent by the President to the Speaker, dated 03 January 2014, regarding the determination of remuneration of Constitutional Judges and Judges .

2.6 The latter reason, in particular, prompted the Committee to procure services of an actuary to review the updated benchmark exercise undertaken by Alexander Forbes. Following the parliamentary procurement processes, Old Mutual Ltd was recommended as a preferred service provider to execute such task. Thus, a report from Old Mutual was used as the basis for the determination of the current salary of Auditor-General.

3. Recommendations on remuneration

3.1 The Committee recommends:

3.1.1 Mr Thembekile Kimi Makwetu , receive a total remuneration package of R3, 889,391.00 per annum commencing 1 December 2013, to be adjusted in line with the annual adjustments to the Chief Justice’s salary, commencing in 2014.

3.1.2 Mr Makwetu is not entitled to an annual performance bonus, as this could compromise his constitutional independence, but should receive a termination bonus on the successful completion of his term calculated as follows:

30 % × average term compensation × years of the fixed term appointment.

3.1.3 The total remuneration package is structured by Mr Makwetu according to the parameters and guidelines as are generally applicable to the Office of the Auditor-General.

3.1.4 Membership of a medical fund is not required.

3.1.5 Contributions to a pension fund are allowed only as part of the total remuneration package of Mr Makwetu .

3.1.6 Other conditions of service are in accordance with the parameters and guidelines applicable to the Office of the Auditor-General.

4. Term of appointment

4.1 The recommendations of the Committee are based on the fact that the President has appointed Mr Makwetu for a 7 year non-renewable period.


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