Gigaba requests investigation into R28bn IFMS tender. Picture: Reuters
Gigaba requests investigation into R28bn IFMS tender. Picture: Reuters
Democratic Alliance members, led by DA leader Mmusi Maimane, protest outside the National Treasury in Pretoria against the "capture" of the critical State institution. PHOTO: Jonisayi Maromo/ANA
Democratic Alliance members, led by DA leader Mmusi Maimane, protest outside the National Treasury in Pretoria against the "capture" of the critical State institution. PHOTO: Jonisayi Maromo/ANA
The national Treasury continues to dodge questions about a suspicious R28 billion integrated financial management system (IFMS) “tender”.

It has also failed to respond to requests for a full list of the beneficiaries of the R9bn Jobs Fund, which President Jacob Zuma announced during his State of the Nation address in February 2011. Business Report (BR) reported on the Jobs Fund in February and recently followed up with a series of questions to the Treasury about the status of the fund.

These questions related to the amount paid out to date to enterprises, how many permanent jobs had been created since 2011 and who managed and implemented (the mandate) of the Jobs Fund. The Treasury was also requested to provide a full list of all the companies, non-governmental organisations (NGOs) and organisations that had received funding from the Jobs Fund since 2011.

BR recently reported on the status of the IFMS and asked who had been awarded this multi-billion “tender” that dates back to when Trevor Manuel was Minister of Finance.

A source close to the Treasury revealed to BR that it had paid Oracle R461million up front in licensing fees (without a tender), that the amount allocated for the IFMS “tender” currently totalled R28bn, and that there was a suspicious contractual agreement between Abacus and the Treasury.

Reply: The Jobs Fund

“To date the fund has demonstrated that it is possible for the private sector, public sector and civil society organisations to collaborate, share risk and achieve greater social impact by implementing innovative models for job creation and, thereby, catalysing broader participation and inclusion in the economy.

“Initiatives supported cover a wide range of interventions, from micro finance to support rural women, to guarantee schemes to crowd in pension fund investments for the support of SME (small and medium enterprise) development, to agriculture support for small holder farmers thus contributing to food security and more resilient farmers.

“The fund has also supported initiatives that have improved the skills match between unemployed youth and existing vacant positions and thereby accelerated the transition of youth from education into employment. Through its support the fund has catalysed the achievement of scale in the operations of funding partners thereby resulting in a more inclusive economy.

“In evaluating projects within its portfolio, the fund is able to demonstrate how effective design of business incubators can help reduce the failure rate of start-ups. However, the evaluation also notes that the shortage of opportunity-driven entrepreneurs is a limiting factor to expanding the sector.

“Well-structured business franchising models have also been identified as an opportunity to enhance SME’s chance of success. By the end of March 2016 more than 12000 businesses had received funding through projects supported by the Jobs Fund.

“The impact and results thus far achieved through the fund’s support for innovative employment creation models indicates that the Jobs Fund’s strategy remains relevant to addressing the challenge of unemployment in South Africa.

More than 155000 permanent jobs have been created as a result of the interventions of our project partners. Of that, 60percent of the jobs were taken up by women, 40percent by men; 60 percent went to youth and 98percent to previously disadvantaged individuals.

“The fund was established in June 2011. The first year of operations focused on a design of operating procedures. From mid-2012 to December 2016 the Jobs Fund has focused on building its project pipeline and currently has an approved portfolio of 117 projects, R6.1bn in grant funds have been allocated to these projects.

“Against this grant amount, the fund will potentially leverage an additional R8.6bn from project partners toward job creation. Of the R6.1bn allocated as per the draw-down requests from our matched funding partners, R3.96bn has been disbursed to 110 implementing projects. Disbursements only occur as per the draw-down schedule provided by our project partners and when projects achieve their contracted targets and when projects have paid their matched funding into the project account.

“In addition to the 155000 sustainable jobs, the Jobs Fund project partners have also created 27314 short-term jobs and provided work readiness and technical training to 209845 participants. At a time when it is increasingly important that public institutions and programmes transparently account for how public finances are spent, the Jobs Fund has put in place measures to ensure the integrity of the work being done to reduce unemployment, poverty and inequality in South Africa.

“Jobs Fund Partners (JFPs) are held accountable to their approved Activities Based Costing Project Implementation Plans, signed grant agreements, as well as the fund’s operating guideline. As outlined in these crucial documents, there are numerous control measures in place to ensure the integrity of the numbers reported to and by the Jobs Fund.

“To proactively manage project implementation challenges quarterly, site visits are conducted. These site visits also enable the Jobs Fund team to corroborate the quarterly reports submitted by JFPs and to collect additional evidence of progress. The site visits also entail meeting directly with project beneficiaries.

“Disbursements are output based. A disbursement committee considers the performance of the project against targets set. It considers the analysis submitted by the financial analyst and monitoring and evaluation specialists as well as the report of the legal specialist who comment on contractual compliance related issues. Projects will receive disbursements for the new quarter only when they have achieved a minimum of 80percent of the contracted output for the previous quarter.

“The Jobs Fund performs a validation check, on a sample basis, of the reported performance and expenditure numbers on a quarterly basis. This validation is performed against a set of agreed evidence, such as employment contracts, letters of employment, payroll information, certificates of training completion, invoices, bank statements, and loan books. The fund will withhold disbursement if this requirement is not met, until the JFP and its allocated team develops a remedial action plan to ensure that the project meets all requirements for the next disbursement period as well as make up for the shortfall of the previous one.

“Projects are required to conduct performance audits, which assess the validity, accuracy and completeness of the project’s quarterly reporting information. Projects are required to submit annual audit reports based on the terms of reference circulated for auditors by the fund as well as consult with the fund when appointing their auditors. Over and above this, the fund annually conducts independent audits of sample projects to verify performance of the selected projects. The Jobs Fund itself is subject to the National Treasury’s internal audit framework as well as that of the Auditor-General of South Africa.

“In support of the fund’s learning agenda, it has put in place a monitoring and evaluation framework that prescribes that projects undergo multi-level evaluations. These include independent mid-term and summative evaluations budgeted for before project implementation. The fund also annually selects projects that could provide insight into effective project design and implementation or that provide insight into how best to achieve scale. The Jobs Fund as a programme is also subject to evaluation by independent evaluators.

“Good governance is a cornerstone of the effective operation of the fund and enables it to ensure that public funds are targeted toward addressing the challenges of unemployment, poverty and inequality and thereby contributing toward the achievement of inclusive economic growth”. The National Treasury ignored the request for a full list of the successful applicants.

IFMS

Various requests via e-mail and in person to the Treasury media representatives remain unanswered. BR recently launched the BR Corruption Buster Series. The team shall investigate. BR is concerned that no media statement or tender has been issued about the allocation of R28bn for the implementation of the IFMS.

Minister Malusi Gigaba’s spokesperson, Mayihlome Tshwete, responded yesterday: “There is no attempt on the part of the National Treasury to conceal anything pertaining to IFMS. The concerns of IFMS have been identified and corrective remedial actions are being finalised. Minister Gigaba has requested the DG (director-general) to resolve the matters that are still outstanding with urgency. We expect to brief the public on this soon.”

-BUSINESS REPORT