Corruption and tender abuse have become so ingrained across government that it will require a radical change to SA’s incentive and accountability structure, including electoral and political reform, to root it out.
This is the view of the new acting director-general (DG) of the National Treasury, Ismail Momoniat, or Momo, as he is affectionately known in SA’s financial community.
Having served in the Treasury for the past 27 years, and as an architect of the financial governance system adopted after 1994 — including the Public Finance Management Act (PFMA), which sets the gold standard for public sector financial management — Momo is well placed to talk about SA’s governance failings.
“We used to think corruption would never become entrenched like it did in Nigeria, Argentina or Brazil,” he tells the FM in an interview. “Now I think we have one of the worst systems of corruption in the world.”
He agrees with the sentiment expressed by his predecessor, former Treasury DG Dondo Mogajane, who warned in a recent parliamentary briefing that the Treasury isn’t coping with the challenges in local government, where about 66% of municipalities are in financial distress.
Mogajane, who resigned last month citing “exhaustion” after five years at the helm, said the Treasury is hamstrung by the governance and oversight challenges affecting local government — problems that are essentially political, not technical, in nature.
Momo, however, stresses that corruption isn’t restricted to the local level, but extends to all three spheres of government. “Local government does what it sees national government doing, and if it is promoting corruption and tender abuse, of course [that will] also be done locally and provincially,” he says.
“During the period of state capture the highest office in the land was promoting the looting of state-owned enterprises. So we shouldn’t be surprised that many politicians think it’s their turn to eat.
“Corruption and tender abuse spread during that period to all three tiers of government faster than the Covid virus. We now need a political vaccine to cleanse the system, as the problem is essentially political.”
Corruption and tender abuse spread during that period to all three tiers of government faster than the Covid virus. We now need a political vaccine to cleanse the system, as the problem is essentially political
— Ismail Momoniat
When corruption becomes an ingrained, systemic problem, it is not something the Treasury can fix by going from municipality to municipality and using technical tools, or by relying on legislative reform, or even on the professionalisation of the public service, he explains.
SA needs to fix the politics behind corruption, implement the National Development Plan’s proposals on the political-administrative interface, strengthen the incentive and accountability structure in the government, and change the entire culture in the public service. This is likely to be an uphill battle that “will require root and branch reform”, but it is necessary not only to make the public service function better but also to reduce the scope for corruption.
Momo explains that the PFMA of 1999 and the Municipal Financial Management Act of 2003 were designed as if corruption was a rare exception that the executive authority (the relevant minister) would always act against. And if not, then the cabinet or the president would act against such a minister. If not them, then ultimately, parliament would step up.
“These, unfortunately, have proved to be heroic assumptions,” says Momo. “After 2009, there were big failures in the parliamentary oversight system. Many looked the other way, and were not curious to ask the hard questions, so our entire accountability system fell apart.”
SA has begun to repair these systemic failures since the election of President Cyril Ramaphosa, but it needs to move much faster to prevent such failures from coming back to bite the country. Take the threat that SA could soon be greylisted by the Financial Action Task Force (FATF), an international money-laundering and terrorism financing watchdog.
In October last year, the FATF released a report citing “significant deficiencies” in SA’s money-laundering and antiterrorism financing architecture, which, if not corrected, will result in SA being greylisted at its next plenary in February 2023.
An FATF greylisting would increase the burden of screening financial transactions on local businesses and banks to clarify all the sources of funding and, likewise, on their global financial counterparts and foreign investors. This would raise the cost of transacting with SA, harming the country’s economic competitiveness and international reputation.
“It is not only in our own economic interest to improve our capability to fight money-laundering and financial crimes, but to ensure that we disrupt criminal syndicates who are sabotaging the economy by stealing public sector infrastructure assets and looting our procurement budgets,” says Momo. “Implementing the recommendations of the Zondo commission will be a big step forward in the fight against corruption.”
Last month, the Reserve Bank rated the likelihood of a greylisting as “high”. Momo concedes that avoiding this will be “very tough”, but adds: “We are working very hard to do so, and the cabinet is fully behind the action steps we are taking.”
The problem is not so much getting parliament, which is headed into recess until August, to pass the necessary legislative amendments before the year is up. That, says Momo, will be “the easy part” and will be done.
Rather, the bigger problem is that the FATF recently introduced a new, much tougher system to assess how well our own laws and antimoney-laundering framework are being implemented. There are now 11 “effectiveness measures”, more than half of which relate to how consistently well the criminal justice system investigates, prosecutes, and convicts people for the crimes of money laundering and terrorism financing.
Unsurprisingly, SA performed very poorly on these new measures. The timing of the evaluation was unfortunate, as it took place in December 2019, when many key institutions were at their lowest points and the country was knee-deep in shovelling up the muck of state capture, with nary a prosecution in sight.
“We have to show we’ve taken steps and turned things around,” says Momo. “But just saying we have a process in place and we’re doing something will not be enough. We have to show that there are results — for instance, that people are being charged and that there are many more convictions.
“So, it will be very tough for SA to avoid a greylisting, but I’m still confident that we can succeed and can demonstrate significant progress by February next year.”
The problem is that the world can’t seem to learn that you need more global co-operation, not less, to deal with a global crisis like climate change
— Ismail Momoniat
When it comes to global geopolitics and the economy, Momo strikes a cautious tone.
He points out that over the past 14 years the global economy has suffered three huge shocks: the 2008 global financial crisis, the Covid pandemic in 2020 and now the Ukraine war.
“We live in the most uncertain of times … I don’t know how things will pan out … we don’t even seem to know what could happen, so we have to be very cautious and reduce our vulnerabilities as a country,” Momo says.
And that’s just in the short term.
“Covid and the Russian invasion are distracting us from the harder challenges we face,” adds Momo. “We should ideally be preparing for climate change, which poses the biggest threat to humanity. Just look at what happened in KwaZulu-Natal.”
In short, Momo feels that global politics has become more toxic, and the world more divided. “This means that navigating our economic path as SA is going to be that much harder.”
The real question, he says, is how, over the next five years, we can make the country more resilient.
The big lesson of the global financial crisis, he believes, is that the world needs to be more proactive in anticipating potential shocks and that it must take co-ordinated action to deal with global crises when they do occur.
“The problem is that the world can’t seem to learn that you need more global co-operation, not less, to deal with a global crisis like climate change,” he says. “The co-operation between global banking regulators during the global financial crisis was a great success story. With Covid, it was each country for itself when it came to making vaccines available.”
The solution for SA, he believes, should involve saving more and planning better, both to anticipate shocks and to build stronger mechanisms to make the economy less vulnerable should shocks occur. So, for example, SA should shift more strongly towards renewable forms of energy, because “whatever we’ve got a surplus of (like sunshine) we will have to use more productively”.
It sends a powerful message when a senior public official is able to speak candidly about the true extent of public sector corruption, to use a phrase like “Russia’s invasion of Ukraine” and to champion the cause of renewables despite the risk of upsetting vested interests.
It is not an exaggeration to say they don’t make public servants like Momo any more. He is unfortunately due to retire in August, but perhaps finance minister Enoch Godongwana can twist his arm to stay — at least until after the national budget and the FATF greylisting decision in February. His participation could make all the difference.
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