The growing rift between public and private sectors!

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Terry Ramabulana | Head: Public Sector | Mazars | terry.ramabulana@mazars.co.za  | www.mazars.co.za |


The latest Auditor General’s (AG) report reveals some major issues that could affect the relationship between South Africa’s public sector and private companies in future.

Private companies may start to become less interested in partnering with the public sector if the trends outlined in the AG report continue.

The numbers

In terms of numbers, the AG report did not really reveal anything that we did not already know.

Irregular expenditure has once again increased substantially (55% in fact) from previous years, and the office of the AG has once again showed that it does not have the teeth required to curb irregular spending. From the outside it seems that the public institutions being mentioned in the report appear to disregard its findings.

This severely affects the relationship that the private sector has with Government. Under the right conditions, public-private partnerships (PPP) are an invaluable part of moving the country forward. It allows the public sector access to some of the best available skills in the market and also helps to grow private sector entities.

Trust

However in a system where corrupt and irregular spending appear to continue relatively unimpeded, private sector companies have their own corporate governance and their own long-term survival to think about first.

Companies that manage to win public sector tenders in a country where corruption seems to be on the rise, will increasingly be faced with questions from their investors and other stakeholders as to how they were selected.

If your Government loses credibility, even companies that follow all the correct channels will start to be viewed with mistrust. The result is that the private sector will increasingly start distancing itself from the public sector, and start looking for opportunities elsewhere. This kind of deterioration of the relationship between these two sectors will inevitably be very detrimental to the public sector.

Where to start?

The only way to repair this relationship would be to start with addressing the problems faced by the AG’s office.

I believe that the mandate of the Auditor General needs to be reviewed. There must be a way for the AG’s office to take on a more pro-active role, as opposed to merely reporting on money that had been wasted.

Allowing the AG the ability to deliver useful comment on how Treasury directs its funds in the first place, would help in my opinion.

Secondly, The AG’s office needs to improve its own processes, investigation techniques and evidence gathering procedures. That way, the AG will be much more equipped to actually take and recommend action where fraud is uncovered.

The solution to the latter suggestion lies in the office of the AG building its own relationships with private sector service providers. The Auditor General should seriously consider partnering with reputable mid-tier private organisations, while still ensuring that it can be seen as independent.

The AG needs to be able to rely on skilled private sector contractors who can advise on its reporting standards and who can provide advanced data analytics services. If the AG’s office does this, it will mean that it is actually scrutinising the information that has been gathered in order to take further action.

Being able to partner with Government is still a great privilege for private organisations and it is vital that both sectors work at preserving their relationship.


 

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