The Treasury is looking at mechanisms to prevent state-owned entities (SOEs) from making offshore payments such as those made to overseas Gupta companies during the years of state capture, acting Treasury director-general Ismail Momoniat said on Tuesday.
These offshore payments saw a lot of illegal financial flows from Eskom, Denel and Transnet disguised as legitimate payments.
Momoniat and Treasury officials contributed to an engagement with members of the National Council of Provinces on fiscal leakages and their effect on service delivery.
The engagement included co-operative governance and traditional affairs minister Nkosazana Dlamini-Zuma and MECs of finance who dealt with the fiscal leakages in their provinces.
“Surely we can take stronger steps to make sure that such [offshore] payments are not made,” Momoniat said.
“We are looking at what the Zondo commission has found and we are asking ourselves how can we take steps to reduce those types of leakages.”
Momoniat said the beneficiaries of stolen money “tend to want to take the money outside as soon as possible and a lot of their structuring is to pay to an outside company even if they bring back the money through another vehicle.”
He said this was not unrelated to the deficiencies in SA’s anti-money-laundering and anti-terrorism-financing regime identified by the Financial Action Task Force (FATF), an international body that sets standards for the combating of money laundering and the financing of terrorism. SA is threatened with a greylisting by FATF if it fails to address these deficiencies.
If SA took the steps to prevent the greylisting, it would improve its ability to deal with financial crimes and the illegal flow of money out of the country, Momoniat said.
Also, audit committees and internal controls at SOEs that did not work during state capture had to be made to work better, to ensure better compliance and to provide an early warning system because once the money was transferred overseas it was almost impossible to get it back.
Momoniat also spoke about the Treasury not wanting public service managers to be so risk averse in the performance of their functions that they were too scared to make decisions.
He said Treasury was looking at ways to allow managers to manage while making them more accountable.
He stressed that there should not be a conflation between corruption and the transgression of regulations. There was a need to focus on irregular expenditure which amounted to corruption.
“There has been real confusion maybe over the last 10 years or so where we are conflating corruption and what is rule transgressions. You can transgress a rule and there has been no corruption at all. Nobody has made money.”
However, noncompliance with a rule can result in irregular expenditure. “We are engaging with the auditor-general to try to look at different types of irregular expenditure so if clearly it is a corrupt or suspicious transaction that is what we need to focus on.
“You don’t want a public service that is risk averse, that is too scared to take decisions.” What was needed were problem solvers.
One of the ways in which the burden on accounting officers was increased significantly was the 2019 introduction of the concept of a material irregularity in the Public Audit Act.
An accounting officer can be held financially liable for failing to implement the remedial action recommended by the auditor-general to address a material irregularity where a financial loss is involved. A material irregularity is defined as noncompliance with, or contravention of, legislation, fraud, theft or a breach of financial duty that resulted in, or is likely to result in, a material financial loss, the misuse or loss of a material public resource or substantial harm to a public sector institution or the public.
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