Keynote address by the Premier of the province of KwaZulu-Natal, Dr Zweli Mkhize, at the Integrity Management Conference, Olive Convention Centre, Durban
21 Nov 2011
Programme Director
Roy Padayachie, Minister for Public Service and Administration
Mr James Nxumalo, Mayor eThekwini Metro
Other mayors and councillors
Prof Bonganjalo Goba, Executive Director: Centre for African Leadership - National Development
Mr Charles Gordema, Head: Organised Crime & Money Laundering Programme, Institute for Security Studies, Cape Town
Ms Pumla Ntsubane, KPMG - Forensic (SA) Fraud and Risk Management
Mr Kalyani Pillay, SABRIC
Honoured Guests
Members of the media president
Ladies and Gentlemen
Good morning
I view this gathering as a significant development in the fight against fraud and corruption in the country and particularly, KwaZulu-Natal.
Our objective to eradicate corruption is motivated by the fact that this scourge perpetuates an unequal distribution of income, asset ownership and it further causes unequal access to basic economic opportunities and basic services such as education and health.
Clearly, the poor are most vulnerable to corruption both in terms of not being educated enough to demand what rightfully belong to them and for being easy targets for intimidation, extortion and bribery.
Transparency International's 2007 Global Corruption Barometer, for instance, indicates that corruption affects respondents with lower incomes more than other income groups.
While they can least afford it, poor respondents consistently report paying more bribes than other income groups to access public services. The amount of bribes paid by low income households is also likely to represent a higher share of their total income.
During the dark days of apartheid there was comparatively no public debate on corruption.
This debate was suppressed because those at the helm of the corrupt apartheid system used the public resources not only for self enrichment but to crush those who were regarded as a threat. There was neither a will on the part of the apartheid government to deal with this scourge nor there were any resources allocated or agencies established to eradicate corruption.
Ours is a democratic government and we are public representatives elected through a democratic process and we serve at the will of the people. We signed a Social contract with the people of this country and therefore any misconduct, ill discipline and the lack of integrity in the public service amounts to the breach of this social contract.
By hosting this conference, Ladies and Gentlemen, we want to make a firm and bold statement that we are a new government.
Honoured Guests, this government is clearly different from the apartheid regime.
As the provincial government we recognise that linking the citizen's voice with transparency and accountability is at the core of good governance.
We have created a space for civil society and human rights activists to engage in both human rights and anti-corruption activities.
The lives of those who expose corruption and journalists who write about corruption are not endangered. That way we ensure that this government remains accountable and transparent.
Fraud refers to trickery or break in confidence for purposes of profit, benefit or unfair advantage. Corruption refers to moral perversion, depravity or perversion of integrity or dishonest proceedings.
Corruption frustrates the aspirations of our people
Corruption generally refers to a state of mind, an attitude or dishonest approach to secure an underserved advantage, utilising access to resources, position of influence or decision making. Fraud tends to refer to the practical act of abuse of a position of trust or lawful access to extract underserved benefit in value to the perpe0trator by subverting normal procedures, manipulation of facts to misrepresent the factual situation and obscure the illegal action conducted clandestinely to prevent immediate detection but to the disadvantage of the intended beneficiaries.
Our government has taken a firm stand to uproot and fight corruption wherever it may rear its ugly head. This we do to conserve resources as fraud and corruption have a potential to cause such massive drain of resources that it poses a risk to undermine service delivery and cause our democracy to flounder. Fraud and corruption is a cancer which, if not arrested has potential to irreparably harm the international standing of our country and its reputation amongst it citizens, making our people lose faith in the future of our democratic country. Fighting corruption is about the restoration of the fibre of our society.
Frustrating the aspirations of our people about the value and potential that our future holds, would have disastrous consequences especially after so many lives were sacrificed to attain our freedom. Eroding the hope about the future of our country and our people may in the long term result in instability, which we can ill afford. It will also be a source of anger and frustration for unemployed and poor people to be given an impression that their plight will not be eradicated speedily as the custodians of the relevant programmes are diverting the resources away from their intended goal of development, service delivery and creation of a better life for all.
We therefore need leadership with integrity to lead government, making it clear that leadership at the government level is for those who are able to champion the cause of the voting public unaffected by any conflict of interest and tendency towards self enrichment.
Investment in strengthening the moral standing and integrity
Fighting corruption needs both the impeccable integrity of those in whose hands the authority and resources of the state are entrusted by the public at large, as well as the culture of collective accountability, transparency and honour from those who control the levers of the state machinery as a whole.
It is the integrity of those who handle public office with honour that generates the respect for the government institutions and create the image of good governance. Intellectual capacity, technical qualifications and possession of rare administrative or specialised skills are a prerequisite for an efficient and effective state yet these attributes are meaningless if employed to abuse the system to the disadvantage of the people for whose benefit the systems or institutions were created. This means the collective conduct of political leaders and civil servants creates the image of good governance or lack of it.
While the public tends to relate well with the arrest, prosecution and ultimate conviction of offenders charged with fraud and corruption, experience has shown that this stage always comes very late. It further shows that for any one act uncovered, many more pass undetected, or with insufficient evidence to sustain a conviction; since those who are responsible for perpetration often tend to be the main and only ones assigned not only to detect but also to prevent fraudulent activity.
This realisation has reinforced our belief in a proactive investment in strengthening the moral standing and integrity of those who take public service as a calling. It is a calling for which those who enter must have service to the public as their objective, not to use their positions in office to provide an alternative source of income or maneuvering procedures to direct benefits for the advantage of chosen friends, family or relatives and associates. Let us stop the decay now. The role of individual consciousness is important in controlling greedy and ambitious accumulation of underserved wealth destined for the poor and downtrodden.
We should emphasise on the importance of professional and ethical service and pride in the fulfillment of the will of the electorate. Elected representatives and employees of the state and state entities need to view the service to community as sacrosanct and an honour to be assigned to the positions of trust over the resources destined to alleviate the suffering of the population.
We need to train our community to understand their rights and the quality of services they are entitled to. It is when citizens know what service to expect that they can expose and resist corrupt officials that disrespect and abuse them extracting bribes for services they are paid to render, exploiting the ignorance of the uninformed, poor and illiterate public who are often too intimidated to offer any challenge or resistance. They often do this to finance the lifestyle they live beyond their means.
The old adage that prevention is better than cure rings true even in this case.
This means emphasising in training ethical conduct, respect love for community and understanding the burden of poverty and patriotic appreciation of the collective aspirations embodied in the spirit of our freedom and values of democracy.
Such training must reinforce the conscience of an employee to detect temptation before succumbing to acts which pose as generosity that goes beyond the realms of honest appreciation or innocent friendship. Bribery starts in small dosages that the conscience digests with innocence until victim becomes a willing solicitor who is always ready to go out of the way to deliver as expected.
At that point both parties are heavily committed to the transaction that both will do everything to evade detection. By that time the rot has set in. The only way to cure the system is to excise the afflicted organs through prosecution while hoping that the entire section has not been infected.
Public-private partnership in crime
It has been common to find a sole operator but often the crime is a partnership operation - within the public service but often it is a public private partnership in crime.
So we must only say we fight corruption full stop-because corruption is corruption wherever it may be, the impact is the same for the economy and for the society as a whole.
There is widespread of corruption associated with the supply chain and procurement sections, fraudulent issuing of tenders and contracts to unskilled and undeserving entrepreneurs who advance cash not proof of quality and capacity to perform as basis of successful award of contracts. All contracts should pass the scrupulous test of value for money through a fair and transparent competitive process. Criminality in the award of tenders must land those involved in prison.
Ladies and Gentlemen, the biggest challenge we are facing is that during these tough economic conditions employees both in government and in the private sector are easily turning to crooking the books to meet their financial obligations.
For them, the temptation to resort to fraud and corruption becomes a way to get out of indebtedness and to "get rich quickly".
The PriceWaterHouseCoopers Economic Crime Survey Report of 2009 points out the effect of the global economic downturn is highlighted by an increase in financial statement fraud.
According to the report the type of statement fraud reported in the South Africa includes:-
- Accounting manipulations - 18%
- Unauthorised transactions/rogue trading - 15%
- Fraudulent application for credit - 13%
- Fraudulent borrowing/raising of finance - 8%
The report also suggests that there has been an increase in bribery and corruption from previous surveys and all sectors have been affected - public and private.
In 2007, 53% of respondents that were surveyed reported having experienced bribery and corruption and this figure increased to 59% in 2009.
The report further points what most of us know - that the "majority of economic crimes are perpetrated from within by employees who understand the system and internal controls which organisations have put in place to detect fraudulent activities."
Clearly these are compelling reasons for all of us - government, civil society and private sector - to speak and act in a coherent manner to eradicate fraudulent and corruption activities.
Office of the Premier's Integrity Management Unit
For our part as government we are strengthening our partnership with law enforcement agencies and we have called on all communities to join government to fight this scourge.
In the Office of the Premier, we have established the Integrity Management Unit which works closely with the Provincial Treasury's Internal Audit Unit. The strategic objective of the component is to integrate, co ordinate and provide strategic leadership and direction for the provincial government on all matters relating to fraud and corruption.
The two units have joined hands with South African Police Services and other organisations within the forensic fraternity to identify and investigate a variety of fraud and corruption activities involving provincial departments and other entities that serve as agents of specific departments and municipalities.
The results are there for everybody to see.
As we speak, the total number of public servants who are facing fraud and corruption charges in the province is 1 024. The total value involved is R529 735 831.00.
Of these cases 755 have been reported for prosecution while others are at various disciplinary stages. We enlisted the services of retired Judge President Vuka Shabalala whose wealth of experience has assisted us to fast-tracking disciplinary matters.
The point we want to emphasise today is that after going through the process of dealing with these cases of corruption and when we count monies involved we have discovered that corruption will have a long-term negative effects on the efficiency of public investment.
We say this because it has become clear that all corrupt officials and syndicates involved tend to give priority to projects and activities that generate higher private materials and political gains over projects with higher socio-economic returns.
Here in KwaZulu-Natal social grants destined for vulnerable members of our society ended up in the pockets of greed public servants. In order to recover this money, government and the Special Investigation Unit have signed Acknowledgement of Debt (AOD) to the tune of R 3 010 290 with public servants concerned. This relates to the period between April 2010 and March 2011.
We were astounded when few months ago when the head of both the special investigating unit and the asset forfeiture unit Willie Hofmeyer reported in parliament that the country could lose as much as 20% of its total procurement budget to graft annually. This could be translated to between R25bn and R30bn.
The SIU was currently investigating 558 procurement contracts to the value of R1.9 bn and 360 cases of conflict of interest where R3.4 bn was involved.
Fraud and corruption is also rife in the private sector. A study conducted by KPMG has revealed that fraud cases have increased from 55 869 in 2003/04 to 88 000 reported cases in the 2010/11 financial year. Incidences of fraud the report says are discovered by chance rather than revealed by whistle blowers despite the existence of the Protected Disclosures Act.
In Africa, it is estimated that the cost of corruption could represent up to 25% of the continent's GDP and increase the cost of goods and services by as much as 20%.
Honoured guests, Ladies and Gentlemen, it is upon me and you to stand up and be counted. The image of a corrupt South Africa and African continent in particular will result in the loss of much needed domestic, regional and foreign direct investments.
The various forms of takings (bribes, kick-backs, etc.) and transactions costs due to corruption (delays, distortions, etc.) increases uncertainty over the returns to capital and raise the cost of production, which ultimately reduces profitability.
Also, corruption acts as a tax on capital; but unlike official tax, it is uncertain and unpredictable, and therefore difficult to internalise.
Corruption is the threat to improving socio-economic conditions
At this point, I want to assure the people of this province and South Africa as a whole that the government of KwaZulu-Natal is still committed to attaining priorities that the president announced in his first state of the nation address.
We have set ourselves the target of improving the quality of life of our citizens and growing the economy of the province. We want to achieve this through an educated workforce produced by the province's quality education system.
We know that the biggest threat to having an educated workforce in this province is those unscrupulous teachers and lecturers who sell examination papers to the students and those who demand sexual favours in return for good grades.
Teachers and lectures should create an environment for the imparting of ethical values and good behavior to be an integral part of professional and intellectual development, because that is what our country and our future will require in huge amounts. Some schools and tertiary institutions have become breeding grounds for a generation that has a weaker ethical base. We must unite and stop this slide to mediocrity and inspire our youth to aspire for excellence and the highest human values that leadership of a special country like ours deserve.
Scores of teachers have been dismissed after the provincial education department discovered that they had fraudulent academic qualifications. This cannot be tolerated, as fraud can only beget fraud. Excellence begets excellence and the two cannot coexist in any normal society.
The department is also dealing with ghost teachers - who draw salaries for staff who are no longer (or never were) employed for various reasons (including having passed away). This affects de facto student-teacher ratios, and prevents unemployed teachers from taking vacant positions and wastes valuable resources.
We commit ourselves as the provincial government to remain firm because we do not want low quality teaching. Inferior education will lead to poor academic achievement and a high drop out rate.A high drop out rate increases high levels of poverty and deepens inequality between the rich and poor.
We are also dealing harshly with teachers who pay bribes to school principals or members of school governing bodies in return for promotions and transfers.
We regard as corrupt any school principal who turns a blind eye to any teacher who does not show up for work on a pay day.
We will never tolerate the embezzlement of funds intended for teaching materials and we will deal harshly with those who provide inferior educational material purchased trough dubious procurement processes.
Similarly, we discourage any form of corruption within the health sector as this will derail our efforts aimed at achieving quality healthcare for all.
Access to health care and essential medicines is needed to reduce disease and death, and enhance quality of life. Medicines are only beneficial when they are safe, of high quality, and properly distributed and used by patients.
As government we condemn that theft of medicine destined for our hospitals across the province.
We are encouraging collaboration with professional bodies to ensure that we invoke practice licenses of any health professionals - nurses, doctors and pharmacists found involved in any illegal trafficking of state medicine.
Although government has made available certain drugs free of charge, these are stolen and sold at exorbitant prices on the open market or in neighboring countries with different pricing policies.
According to the Word Health Organisation about US$ 4.1 trillion is spent globally on health services every year, with US$ 750 billion spent in the pharmaceutical market. 10 to 25% of public procurement spending (including on pharmaceuticals) is lost to corrupt practices.
In developed countries, fraud and abuse in health care has been estimated to cost individual governments as much as US$ 23 billion per year.WHO further states that countries with a higher incidence of corruption have higher child mortality rates.
Fight Against Cyber Fraud
We are mindful of the fact that the 21st century has been characterized as the information age. Like many organizations, government is using Information Communication and Technology in order to secure competitive advantages and be more effective and efficient in delivering services to the citizens.
Unfortunately ICT has also made government more vulnerable to corrupt and unscrupulous elements.
As you know that access to an IT system is through username and password but unfortunately passwords and usernames are not always secure.
I know one case which involves an employee whose password and username was used to access BAS and PERSAL system. As the result of this, the province reported 19 fraudulent transactions to the tune of R179 m through this type of fraud and 19 criminal cases were registered with the South African Police Service (SAPS) and the DSO.
Our efforts aimed at dealing with cyber crime in the province have now been strengthened following the launch of the cyber crime awareness campaign which is part of Unembeza Campaign
Unembeza is a pro-active strategy aimed at identifying control weaknesses on the provincial IT systems and networks.
We are investing in the e-DNA system which requires more than just a username and password if you want to access the system.
eDNA is comprised of a smart card which has credentials that can only be confirmed using an individual's fingerprint on a biometric device.
What is also interesting about the eDNA system is that you can clearly manage the movement of individuals into a restricted area or from accessing a system which contains sensitive information. This can be activated by linking an individual into an eDNA system which is in building's access control system.
This will prevent an individual who has not entered the building's access control system from logging onto the computer terminals housed in it.
Our ultimate goal is to protect government records and classified information which is crucial in ensuring public trust and confidentiality.
Action plan to deal with fraud in supply chain
Given the reality of fraud and corruption, our government has introduced a variety of mechanisms to promote integrity and combat corruption.
These include minimum anti-corruption capacity requirements, a Code of Conduct, financial disclosure framework for senior managers and official in finance and Supply Chain Management (SCM) components.
The financial disclosure framework is being reviewed to compel all officials in government to disclose their financial interest irrespective of their ranks or responsibility. This way we compel individuals to declare honestly acquired assets and action is guaranteed to those who flout this provision.
We will soon launch Sukuma Sakhe Hotline to enable communities and whistleblowers to report fraud and corruption.Members of the public can also notify government if they know and suspicious conduct of officials involved in the Supply Chain Management. This forms part of our efforts aimed at combating unethical conduct in our SCM.
Linked to this initiative, we are implementing a contract management strategy to ensure that service providers are not simple paid but have achieved set performance measures. All contracts that the province has with various service providers will be renewed.
We have established a Tender Appeals Tribunal which offers members of the public to question any process in the awarding of tenders. The tribunal has already reversed several contracts which had been awarded under controversial circumstances. We are now establishing Tender Appeals Tribunal in various municipalities across the province.
Although efforts are constantly been made by government to curb the scourge of fraud and corruption, we believe that for our anti fraud and anti corruption strategy to succeed, we must work together.
We welcome you to this historical gathering, which is a milestone in the history of governance of the Province of KwaZulu-Natal, if not the whole of the Republic of South Africa.
We as Government have committed to clean governance that is free from corruption and fraud in order to live up to the mandate given to us by the South African electorate to deliver them from poverty and bring about a better life for all.
We want ensure that KwaZulu-Natal leads in the fight against all forms of corruption.
With your support, I have no doubt that we will slowly turn the tide.
I thank you.
Issued by KwaZulu-Natal Office of the Premier, November 21 2011
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