A conversation with Kimi Makwetu: Auditor General of South Africa
LM: Some people know you as a former student activist, how important were those years in forming your principles and values?
KM: These were very significant years as they helped me distinguish between my own interests and broader public interest. All sorts of sacrifices and discipline were emphasised. I also encountered a number of people who were activists across the country who displayed qualities and attributes of being of service to others. I was entrusted with responsibilities in the student movement when there were virtually no check and balances, you had to bring it upon yourself to be a check and balance while ensuring that you do not sacrifice others. This became more elevated when I performed treasury duties as part of the leadership core where the principle of accountability took centre stage in lubricating the different activities of struggle. These disciplines and values are still useful and help me navigate through difficult and testing times.
LM: What attracted you to the role of the Auditor General, and how did you see its scope and impact in society?
KM: I commenced my working career in the private sector in 1990 (Standard Bank). Over the years I became conscious about the lure of money and material goods’ ability to drive a wedge between the leaders and the led. It was around the time that many leaders were warning about the dangers of the gravy train that I developed an interest in finding common cause with those institutions that would temper and mitigate this temptation. There was a dearth of skills in the area of accounting and auditing which I believed was a critical skill in helping the post-1994 administration bring about order in the administration. Many activists never ventured into this area of study as they would tease us, “we are pre-occupied with the principles of Capitalism while the townships are burning”. As the sphere of local government took shape in the first decade into democracy, it was apparent that more of the financial and administrative capabilities and related oversight would become an inherent feature of how we cement accountability.
I was convinced that there was a need to assist government and the public in appreciating the interplay between money/humans/materials and the dangers a misalignment of these poses to the strategic objective. When the opportunity presented itself, it was not too difficult to consider joining the ranks of the Auditor General South Africa.
LM: How important should ethics, integrity and probity be in the life of a public servant and a public representative?
KM: We operate in a country where inequalities are still prevalent and define our life’s journey. Because of the limited resources at our disposal – human, physical and financial capital – the one way to build formidable capacity to enable others is to invest in good people. Public servants and representatives stand as midwives between these limited resources and the prospects for a better qualitative life for all citizens. If the lure for money and material benefits is their primary motivator, the service ethos and care for others is compromised. Whenever ethics and integrity are taught, they should always be positioned as a reminder of an existing set of values that drive conduct. We must cultivate these as a way of life, where a clear tone at the top is visible for all. Such an orientation creates predictability and builds public confidence in the ability of public representatives to serve others selflessly.
LM: Where did South Africa go wrong to get this level of fruitless expenditure, corruption and poor corporate governance?
KM: Good exemplary leadership that drives a strong tone at the top did not become an entrenched reality after the 1994 breakthrough. Where there were elements of this, it did not hold firmly as the accountability architecture in the making was quickly suffocated and disrupted by political interests with a self-serving agenda. This unfortunately introduced a culture of impunity with the concomitant disruption of state institutions designed to address the emergency of this scourge.
LM: What are the key things you have highlighted in your latest audit report on municipalities?
KM: Monies placed at the disposal of municipalities continue to be misused and get subjected to environments that are not controlled with due care. Such a circumstance fails the basic interests and expectations of ordinary citizens. Those responsible for the diversion of these resources get away with little or no consequence. As a result, most municipalities finances are significantly strained, consequently their ability to continue in operational existence is severely strained. The ability to deliver services continues to be constrained and capacities at different levels of activity are weak and impact directly on the fortunes and prospects for success, even for those that risk their investment capital for much needed job creation.
LM: Parliament is considering giving the Office of the Auditor General more powers. What are these aimed to address?
KM: Over the years, the Office has lamented the lack of consequences for frequent transgressions of prescribed financial management prescripts as the primary reason that adverse audit outcomes remain the way they’ve always been. This is one of the key reasons and not the only one. In our engagements with the Standing Committee on the Auditor General, our parliamentary oversight mechanism, it became clear that this is one area of contribution those charged with legislative oversight could make to bring about a decisive shift in the management of public funds.
In essence, these powers are aimed at addressing what Jean Jacques-Rossouw once wrote about in “the discourse of a political economy” in the 19th Century, dealing with the subject of public accountability – when he said:
“the man who once gets the better of remorse will not shrink before punishments which are less severe and less lasting and from which there is at least the hope of escaping, whatever precautions are taken, those who only require impunity to do wrong will not fail to find means of eluding the law and avoiding its penalties. The reward of virtue soon becomes that of robbery; the vilest of men rise to the greatest credit; the greater they are, the more despicable they become; their infamy appears even in their dignities, and their very honors, dishonor them”.
We hope that these amendments will add to the arsenal of tools at the disposal of public institutions charged with supporting democracy towards a more accountable and caring public service.
LM: As you near the end of your term, what are the specific challenges you want addressed by local government, State owned enterprises, Government departments and provincial departments.
KM: There is a common thread among all of the different spheres of government. They don’t look well after the monies entrusted in their care for delivery of various public needs. Exceptions are few and far between.
Either their accounting records are not kept and maintained with requisite competencies or senior management never take steps to ensure these are carried out, or corrective steps taken where there is a flagrant disregard for norms and standards. Where related services are not delivered or infrastructure is allowed to deteriorate or assets go astray, there is often no real accountability for such lapses.
In such environments, syndicates with external parties are also easy to construct and the losers are normally the public and those that rely on reliable public goods to carry out their activities. If the above challenges could receive priority attention in all areas regardless of sphere of government, South Africa could be on its way to turn the corner towards a more productive and successful country.
LM: You took a bold and courageous step on the action against Sizwe Ntsaluba and KPMG. What were the main reasons you took such a decision?
KM: All the registered audit firms in South Africa are eligible to deliver audits constitutionally entrusted to us. We value and appreciate their support and efforts over the years as it would have been extremely difficult for the Office to singlehandedly shoulder this mammoth task. When allocating this work, we often emphasize the sanctity of independence and professional practice management disciplines that safeguard quality audits. Once there has been a departure from these fundamentals, the trust relationship breaks down. It is around these fundamentals that activities associated with the two audit firms forced our hand into the decisions we took on 17 April 2018.
LM: There are moves on the UK to break up the Big 4 consultancies – Do you support that notion for South Africa?
KM: I think South African auditors have a huge task to put the auditing firms on a platform that will enable members of the public to restore the faith and confidence they’ve always had in the profession.
Due to many elements that make for this level of trust, I would be cautious to choose the breakup of the Big 4, however, the difficulties that are imposed by such structural dynamics should not be ignored. The provision of assurance services are concentrated among the Big 4 who command huge budgets and international networks, significantly increasing the barriers to entry for mid-size and emerging firms. This cannot be sustained, as inappropriate relationships start forming with unintended consequences of professional assurance providers positioning themselves as seasoned consultants and business advisors to the people against whom they need to mitigate the risks of agency. This is just one aspect of what the profession should thoroughly deliberate.
It may also help for all the practitioners to think hard about whether, in conducting their assurance services, is it about pursuing the letter or the spirit of the law? This is also hard for them to discern as the people writing the cheque for professional services may be intent on an answer that is about the letter of the law rather than its spirit. One sees a lot of this in offshore advisory and related taxation services that many of these firms provide and in turn give assurance on the same statutory accounts.
LM: Tell us a bit about your son, the Country ‘s U19 Cricket Captain? How does this make you feel?
KM: Recently the SA u19 cricket team returned from a successful and victorious tour of England where they won the ODI series. Wandile, my son, was the team Captain. When he emerged carrying the Cup back home upon arrival at the airport, it reminded me of his words in Grade 2 when we visited his class after hours as the Grade parents. In his message to Mom and Dad he wrote “class is boring today, I wish I was making runs outside in the field”. I thought then, there was a method in the madness. The 99* against West Indies in Tauranga, New Zealand, at the u19 World Cup remains one of those special innings to have watched live in his cricket career so far. Very proud moment.
LM: What legacy would you like to leave for the office of the Auditor General?
KM: The Auditor General South Africa is a resilient organization endowed with rich human resources and an immense goodwill. There has been a generational shift over the last 10-15 years with more hungry young South Africans determined to excel and succeed in their chosen careers. With additional powers to effect consequences and make an independent audit encounter count, we’re in good hands. South Africans will smile when reading the follow-up reports reflecting on steps taken to protect the fiscus. We are frantically at work developing the necessary regulations that will accompany these new powers. We only hope and trust that those elected will do their part to make sure that the efforts of this Chapter 9 institution contribute decisively to make an indelible impact on the lives of all citizens.
LM: Is there enough succession planning and talent in the organization beyond your term of Office?
KM: We have invested in strong training and development initiatives over the years. To this end, we have managed to chalk up around 650 CA (S.A)’s in the permanent establishment of the Office. This very strong absorption rate was built to also provide a pool of varied talent from which to look when opportunities for advancement to the next level arise. As a consequence, whenever opportunities arise, we have been fortunate to draw from our own deep wells, while supplementing with external resources where warranted. Our own people are the invincible fortress to guard our independence and professional competence as individuals and collectives. We hope and trust that this track record will assist the decision-makers to make the right decisions when the need arises.
LM: How do we bring more ethical leaders into both public and private sector roles?
KM: I think both these sectors have ethical leaders in abundance only if those that are in charge stopped looking for people like them. Ethical leaders flourish where risk taking is encouraged rather than in rigid and tightly controlled environments. Fair play and opportunity management that enhances growth and development will unearth ethical leaders. People’s ethics are often changed and corrupted by those they work with and for whom they must chase certain outcomes. Corporate South Africa must encourage this culture, rather than try source leaders who conform to their stereotyped predilections.
LM: What message do you have for young people coming up the ranks or starting in the accountancy or Audit profession in the light of the current scandals?
KM: The waves hitting the Accountancy and Auditing profession must be devastating to many young people starting out in this profession. We have been through this cycle in a different economic context before, in the late 90’s soon after the sanction years. This was after the consolidation of many small accounting and auditing firms to what we know today. The Nel Commission report on the MasterBond Affairs is a very elegant reference that testified to this sentiment and I would encourage all to dig deep into this material. There can be no doubt that our profession must co-exist with the business and government sector as we know it or in whatever future shape these will re-emerge. Accountancy and Auditing are an inevitable concomitant of the pursuit of goals by some, on behalf of others the world over – no one can wish it away whatever the current challenges. Stick it out and position yourselves to be the key cog that will sustain the next wave, and infuse the profession with the values and culture that is worthy to society across the generations. Self seeking, greed and all that goes with them are those that must be eliminated from all our pursuits if we are to restore the integrity of the profession. This is a challenge for all young professionals including those in non-assurance disciplines within the wider profession, not least students and trainee accountants and auditors.
LM: What do you see your next steps after you leave the office of the Auditor General?
KM: “Ja maan, you are asking too many questions” lol. In whatever area of work, I will be involved, come the end of my term in November 2020, I would like to pursue a role that provides assurance and comfort that those that act on behalf of others are doing so with utmost care, skill and diligence. That they must not have sleepless nights because of their inability to manage and supervise their own affairs.
This has been my mission since childhood from the day my mother decided to make me her trusted accountant (aged 10) after school, while selling offal to migrant workers in Langa and Nyanga Townships of Cape Town, at the height of influx control when women were not allowed by law to roam around the male-only quarters that housed migrant labourers, I was her trusted bookkeeper otherwise the municipal police that enforced influx control would take away her hard-earned takings.