Strict oversight promises tied to IMF loan

Finance Minister Tito Mboweni and Reserve Bank governor Lesetja Kganyago have made an undertaking to the IMF that the auditor-general (AG) will be roped in as part of ensuring that the R70-billion loan will be spent prudently.

In a letter to IMF’s managing director Kristalina Georgieva, the two senior leaders committed that necessary steps would be taken to arrest the country’s runaway debt. South Africa’s commitment to ensure transparency and monitoring of the COVID-19 expenditure came as concerns deepened over the alleged looting of funds in the procurement of personal protective equipment (PPE), among others.

“In line with the Public Financial Management Act, we are committed to transparently plan, use, monitor and report all COVID-19-related spending to ensure it reaches the targeted objectives, by publishing on a regular basis the execution of COVID-19-related expenditures, auditing such expenditure, including ex-post valuation of delivery, within 12 months of the end of the fiscal year, to be performed by the auditor-general and publishing the findings,” the minister told the IMF.

Mboweni and Kganyago also noted that the country would publish a list of all the companies that were awarded COVID-19-related contracts, including the owners of these companies. In last address to the nation last week, President Cyril Ramaphosa announced he had signed a proclamation allowing the Special Investigating Unit to go after those involved in stealing the COVID-19 funds.

Ramaphosa said the government was increasingly hearing about fraudulent UIF claims, overpricing of goods and services, violation of emergency procurement regulations, collusion between officials and service providers, abuse of food parcel distribution and the creation of fake non-profit organisations to access relief funding.

Mboweni and Kganyago told the IMF that the central bank would undergo safeguards assessment as soon as feasible and provide the IMF with the central bank’s audit reports. The bank will also authorise the global lender’s officials to engage with external
auditors when needed.

They added that from the 2021 financial year, action would be taken to reverse the upward trajectory of the public debt-to GDP-ratio. “To facilitate this effort, we are open to introducing a debt ceiling in addition to the nominal spending ceiling currently in place. The October MTBPS [medium-term budget policy statement] and the process leading up to the February 2021 Budget will propose fiscal consolidation measures that will allow public debt to decline after peaking at 87.4% of GDP [gross domestic product] in FY [financial year] 2023/24,” the letter reads.

Delivering his supplementary budget last month, Mboweni said out of every rand paid in tax, 21 cents goes to servicing debt. Some of the reforms the government undertook to implement include reducing the public sector wage bill and strengthening of enforcement to enhance tax compliance.


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