“Take your money out of South Africa. This country is in deep trouble.”
This is the shattering advice given by Efficient Group’s chief economist Dawie Roodt following the release of the auditor-general’s report on national irregular expenditure.
The report showed that irregular expenditure increased 55% since the previous year to R45.6billion and could rise to as high as R65bn.
Auditor-general Kimi Makwetu said this amount could be even higher as it did not include the irregular expenditure where audits were still ongoing. This included the Passenger Rail Association of SA, at which irregular expenditure last year was almost R14bn.
KwaZulu-Natal, Free State and Limpopo were among the provinces that were the main contributors to the significant increase in irregular expenditure.
The sectors with the highest amounts of irregular expenditure were health at R11.77bn, transport at R6.38bn and education at R6.09bn.
In addition, the auditor-general reported that 25% of the auditees disclosed that they had incurred irregular expenditure but that the full amount was not known, while 28 auditees were qualified as the amount they had disclosed was incomplete.
Honing in on the report, Roodt said that the country had reached a stage at which it could no longer afford such outcomes.
“This is the taxpayers’ money that is being misspent, which means that the state needs to cut back on its expenditure. This country is in dire straits,” he said.
Roodt predicted that the country would soon be downgraded which would force the economy into recession. According to his calculations, the state needed to cut its expenses by 6% to 8% next year, “which is highly unlikely”.
“We have basically reached the end of the line and pushing the economy into recession would be the only option. You have to be cruel to be kind, but politicians don’t think like this.
"The best advice I give to my clients and will tell to your readers is take your money out of the country,” Roodt said.
At a national level, there was a slight improvement in the outcomes with the number of clean audits increasing to 30% of the total population.
Provincially the Western Cape and Gauteng continued to produce the best results. “It is also clear that these results are being sustained from year to year due to leadership emphasising a culture of accountability,” said Makwetu.
He also recognised improvements in the audit outcomes in both the Eastern Cape and Limpopo, attributing these positive trends to the leadership roles of the provincial treasury and the premier, respectively.
In contrast, the auditor-general's outcomes in Mpumalanga, the Northern Cape and KwaZulu-Natal were “erratic” over the past four years.
Makwetu reported that this was caused by a lack of urgency at leadership in responding to the root causes of the audit outcomes in those provinces.
KwaZulu-Natal provincial leader of the DA, Zwakele Mncwango, said he found the report “shocking”, adding that with the constant release of such reports, “South Africans seem somewhat accepting of corruption”.
He criticised the lack of accountability, saying that officials were not following proper procedures when it came to money “because they know they will be protected by the politicians”.
“We need proper leadership and the will to stop irregular expenditure,” Mncwango said.
He commended the Western Cape and Gauteng for producing the best results, saying that “the reality showed that where the ANC does not govern, you can improve”.
“One can call it politicking but it is just the truth,” he said.
While the overall audit outcomes showed a noticeable improvement, Makwetu reported that progress was hampered by factors such as poor compliance with laws and regulations, especially in the areas of supply-chain management, inappropriate monitoring of key project deliverables and an inability to manage the finances of departments and entities properly.
He cautioned that as long as the political leadership, senior management and officials did not make accountability for transgressions a priority, irregular, unauthorised and fruitless and wasteful expenditure, as well as fraud and misconduct, would continue.
“An environment weak on consequence management is prone to corruption and fraud, and the country cannot allow money intended to serve the people to be lost.” he said.