1. PRESENTATION TO THE SELECT COMMITTEE ON CO-OPERATIVE GOVERNANCE AND TRADITIONAL AFFAIRS THE STATUS OF FINANCIAL DISCLOSURES AND COMPLIANCE OF DEPARTMENTAL HEADS 26 February 2013

2. OUTLINE OF THE PRESENTATION  INTRODUCTION  BACKGROUND ON THE FRAMEWORK  ROLE OF THE PSC IN THE FINANCIAL DISCLOSURE FRAMEWORK  COMPLIANCE WITH THE FRAMEWORK  COMPLIANCE BY DIRECTORS-GENERAL AND HEADS OF DEPARTMENT  SCRUTINY OF THE FRAMEWORK  COMPARATIVE STUDY  PROFESSIONALISING THE PUBLIC SERVICE  CONCLUSION 2

3. INTRODUCTION The Public Service Commission (PSC)– o is established in terms of the Constitution; o promotes and maintains effective and efficient public administration with a high standard of professional ethics. Its core business is to investigate, monitor, evaluate and advise on strategic Public Service issues. This presentation provides a brief overview of the management of the Financial Disclosure Framework (Framework) in the Public Service, as well as information on compliance by Heads of Departments with the Framework. Professional ethics Efficient, economic and effective use of resources A development-orientated public administration Provision of services in an impartial, fair and equitable way Public Participation Accountabilit y Transparency Good HR management and career-development practices Representivity 3

4. 4  The PSC has since 1999 realized the importance of managing the potential conflicts of interest of public servants and subsequently developed the Framework.  The Minister for Public Service and Administration during March 2000 approved that the Framework be incorporated as Chapter 3 of the Public Service Regulations (PSR).  All members of the Senior Management Service (SMS) are required to disclose to their respective Executive Authorities (EAs), particulars of all their registrable interests not later than 30 April each year.  The PSR further require of the EAs to submit copies of the forms on which the designated employees disclosed their financial interests, to the PSC by not later than 31 May of each year. BACKGROUND ON THE FRAMEWORK

5.  The Framework provides for the PSC’s role in the management of conflicts of interest in the Public Service. Therefore, since 2000, the PSC has been managing the Framework.  During the initial years, the focus of the PSC’s work on the Framework was on compliance with the requirement to submit financial disclosure forms.  Since 2006, the PSC expanded its focus to include the scrutiny of the disclosures to identify potential and actual conflicts of interest in departments and to advise Executive Authorities accordingly.  The PSC is in the process of scrutinizing 100% of the financial disclosure forms. In previous years, due to capacity constraints, the PSC only scrutinized 30% of the disclosure forms on an annual basis. This initiative will assist the PSC in identifying potential and actual conflicts of interest in all departments and advise Executive Authorities accordingly. 5 ROLE OF THE PSC IN THE FINANCIAL DISCLOSURE FRAMEWORK

6. 6  The compliance rate by the stipulated due date from the 2007/2008 financial year to the 2011/2012 financial year has improved.  While there has been an improvement, only 100% compliance is acceptable! COMPLIANCE WITH THE FINANCIAL DISCLOSURE FRAMEWORK (1)

7. 2011/12 FINANCIAL YEAR NO. OF SMS MEMBERS PERCENTAGE RECEIVED National Departments 520667% Eastern Cape 68374% Free State 33164% Gauteng 64899% Kwazulu-Natal 52089% Limpopo 49496% Mpumalanga 29996% Northern Cape 227100% North West 31227% Western Cape 358100% OVERALL PROVINCIAL TOTAL 3872 84% COUNTRY TOTAL 9078 74% 7 COMPLIANCE WITH THE FINANCIAL DISCLOSURE FRAMEWORK

8. 8  The compliance rate by the due date in the national and provincial departments has improved from below 50% between 2007/2008 and 2009/2010 financial years, to 74% in the 2011/2012 reporting period.  There has been a slight increase of 6% compliance in the 2011/2012 financial year compared to the financial year 2010/2011. COMPLIANCE WITH THE FINANCIAL DISCLOSURE FRAMEWORK (2)  The Northern Cape and Western Cape are the only two Provinces that achieved a 100% compliance rate by the due date.  There are some departments, both at national and provincial level that did not submit a single financial disclosure form to the PSC by the due date of the 31 May 2012.

9.  Seventeen national departments and fourteen provincial departments in three provinces did not submit financial disclosure forms by the due date.  The North West Province did not submit any disclosure form by the due date. 9 COMPLIANCE WITH THE FINANCIAL DISCLOSURE FRAMEWORK (3)  The EAs were advised that disciplinary action should be taken against defaulting SMS members, in terms of the Disciplinary Code and Procedures as contained in the SMS Handbook.  To promote the timeous submission of the disclosure forms and in order to improve the scrutiny process, the electronic submission of the disclosure forms will be implemented during the 2013/2014 financial year.

10. COMPLIANCE BY DIRECTORS-GENERAL AND HEADS OF DEPARTMENT  The financial disclosure forms of 37% of Directors-General (DG’s) were outstanding by the due date of 31 May 2012.  In three cases, the DGs were either placed on special leave or suspended.  The EAs have the responsibility of ensuring that the officials concerned submit their financial disclosure forms.  The non-submission and late submission of disclosure forms by DGs and Heads of Department (HoDs) is a cause for concern. As Accounting Officers, they should set the example in ethical behavior in departments.  They should promote transparency by, inter alia, submitting their financial disclosure forms timeously and encourage officials within their respective departments to do likewise. 10

11. 11 NATIONAL / PROVINCE NUMBER OF HEADS OF DEPTS RECEIVED BY 31 MAY 2012 OUTSTANDING AT 31 MAY 2012 National 452619 Eastern Cape 11 Free State 11 Gauteng 11 Kwazulu-Natal 11 Limpopo 11 Mpumalanga 11 Northern Cape 11 North West 101 Western Cape 11 COUNTRY TOTAL 5434 20 COMPLIANCE BY DGs

12.  All HoDs in the following provinces submitted forms by the due date: Gauteng, Limpopo, Mpumalanga, Northern Cape, Western Cape  The forms of HoDs in the following provincial departments were not submitted by 31 May 2012: 12 Eastern Cape Education Health North West Agric, Conservation, Env & Rural Dev Education Finance Human Settlement Local Gov & Traditional Affairs Office of the Premier Public Works, Roads & Transport Social Development, Women, Children & People with Disabilities Sport, Arts & Culture Free State Coop Governance & Trad Affairs Econ Dev, Tourism & Env Affairs Education Human Settlements KZN Community Safety & Liaison Coop Governance & Trad Affairs; and Royal Household Health COMPLIANCE BY HoDs OF PROVINCES

13. 13  The scrutiny process involves the verification of information relating to directorships and partnerships on the CIPC database.  The nature of activities relating to consultancies and retainerships as well as work performed by an SMS member outside of the Public Service, are used to formulate an opinion on the prevalence of potential or actual conflicts of interest.  All the activities that an SMS member is involved in are assessed against the official activities of the particular SMS member.  The Deeds Registry database is also consulted to verify whether a particular senior manager disclosed all his/her properties. SCRUTINY OF THE FINANCIAL DISCLOSURE FRAMEWORK (1)

14. SCRUTINY OF THE FINANCIAL DISCLOSURE FRAMEWORK (2) 14 Nat/Prov No of SMS members % of Potential Conflicts of Interest Correlation between Official Responsibilities and Private Company Many Companies National58231.0%24.7%16.2% Eastern Cape17634.7%12.5%18.8% Free State4727.7%6.4%17.0% Gauteng28535.8%18.6%21.4% Limpopo18933.9%20.6%24.9% KZN13923.0%15.8%9.4% Mpumalanga9639.6%36.5%25.0% Northern Cape6428.1%20.3%17.2% North West4148.8%34.1%22.0% Western Cape9416.0%11.7%9.6% GRAND TOTAL171330.6%20.8%18.0%

15. 15 Mozambique The forms of senior members are accessible to only a small select number of officials. Botswana Employees’ supervisors are involved in the disclosure process. Making it an obligation to update records whenever a significant change occurs. Disclosure of spousal and family members’ information Asian Countries Vietnam Thailand Korea Sri Lanka Disclosure of moveable assets (Vietnam, Thailand, Korea) Cash loans, earned income, cash and debts must be disclosed. (Korea and Thailand) Disclosure submitted annually and within one month after appointment. Filing required upon change in assets. Sanctions and fines (Salary degrading, scale degrading demotion, fine, dismissal) (Vietnam, Sri Lanka and Korea) COMPARATIVE STUDY (1)  The management of conflicts of interest in the Public Service is not yet functioning optimally.  There is a need to entrench the management of conflicts of interest within the Public Service as one of the strategies to fight corruption.

16. COMPARATIVE STUDY (2)  The following lessons were learned through a comparative analysis of the management of conflicts of interest: All public servants should disclose conflicts of interest as soon as they occur. All public servants should disclose spousal interests and those of their family members. Supervisors should be involved in managing conflicts of interest. Departments should adopt conflicts of interest policies. Cash loans, earned income, cash and debts should be disclosed. Registrable interests should be disclosed when there is a change in assets. Clear-cut sanctions and fines should be imposed on late and non- submissions of financial disclosure forms. Disclosure of financial interests upon leaving office. 16

17. PROFESSIONALISING THE PUBLIC SERVICE (1)  It is evident from the National Development Plan (NDP) that South Africa needs to focus relentlessly on building a professional public service and a capable state.  The experience of other countries shows that this cannot be done overnight. Measures will have to be strengthened over time.  In terms of the NDP the following key areas should be targeted: Stabilise the political-administrative interface. The current emphasis on “political deployment” needs to be replaced by a focus on building a professional public service that serves government, but is sufficiently autonomous to be insulated from political patronage. Make the public service and local government careers of choice. At the top, recruitment and management should be based on experience and expertise. Develop technical and specialist professional skills. 17

18.  The NDP has recommended that rules restricting the business interests of public servants be made more specific and clear.  In December 2012 Cabinet approved a recommendation by the PSC to prohibit public servants from doing business with Government. 18 PROFESSIONALISING THE PUBLIC SERVICE (2) The Bill of Rights provides that “Every citizen has the right to choose their trade, occupation or profession freely. The practice of a trade, occupation or profession may be regulated by law”. The Public Service Act is the legislation that regulates the general public service profession Section 30 of the Act sets out some of these conditions and determines that no employee shall perform or engage himself or herself to perform remunerative work outside his or her employment, except with the written permission of the executive authority of the department. There is a need to amend this section of the legislation.

19. CONCLUSION  The improvement in the submission rate by the due date could be attributed to the strategies adopted by the PSC to assist departments in complying with the regulatory requirement.  The PSC is still concerned that there may be instances where designated officials submit their financial disclosure forms by 30 April to their respective EAs, but the EAs delay in submitting the forms to the PSC.  The obligation to submit the disclosure forms to the PSC rests with the EAs.  The PSC is, therefore, of the opinion that the National Assembly and Provincial Legislatures should monitor and ensure that EAs comply with the Framework.  In order to achieve this, Parliament and Provincial Legislatures must also assist the PSC by including, in their monitoring mechanisms, the aspect of requiring departments to report on actions that have been taken against transgressors, and where no action has been taken, reasons for such omission. 19

20. PSC Website: www.psc.gov.za National Anti-Corruption Hotline for the Public Service: 0800 701 701