Do ministers know their powers?

I was astonished when I first read reports that Transport Minister Dipuo Peters had written to the board of the Passenger Rail Agency of South Africa instructing it to stop the investigation into contracts worth billions of rands awarded during the tenure of former CEO Lucky Montana.

The probe was initiated after public protector Thuli Madonsela's damning report last year, in which she instructed the state and the company to investigate all contracts of more than R10-million.

It recently took the highest court in the land to persuade President Jacob Zuma that when the public protector speaks we must listen. It seems that message has not registered with his ministers.

Thanks to Twitter, we all got to see the letter. Its contents are cause for serious concern about our ministers' understanding of their powers as shareholder representatives of state-owned companies - and specially about Peters's motives.

story_article_left1

"I am however deeply concerned that this investigation seems endless and without clear scope with a specific end objective. This situation has resulted in excessive spending, which is reported to be in the region of R80-million.

Exacerbating this is the fact that the money spent has not been budgeted for and can be regarded as irregular expenditure," she said.

So in short, it seems the minister is instructing the company to stop the investigations because it's expensive and the costs have not been budgeted for. She apparently also fears the auditor-general may regard it as irregular spending.

The Public Finance Management Act defines irregular expenditure as "expenditure, other than unauthorised expenditure, incurred in contravention of, or that is not in accordance with, a requirement of any applicable legislation, including the PFMA".

In short, this refers to spending that has broken procurement rules, regulations and actual legislation - ironically, the very thing that Prasa is investigating.

Hopefully, the minister was not suggesting that Prasa's decision to abide by the instructions of the public protector and duly investigate these alleged transgressions was in itself a contravention.

This would suggest that Prasa is so rotten that even the board, tasked with investigating transgressions, has broken its own rules in appointing Werksmans.

I suspect the terminology the minister was looking for is "unauthorised expenditure". This refers to spend that has not been budgeted for or funds spent for a reason other than the one specified in the budget.

One can appreciate that there will always be instances where costs which were not planned would be incurred. This is more so when the spend relates to a finding of the public protector, who in turn instructs you to carry out your own investigation. This is why procurement regulations allow for recourse in such instances.

So unless the minister is suggesting the board did not follow these rules, how can she be concerned about unauthorised expenditure?

But what about the concern over the R80-million? Indeed, state-owned enterprises must be frugal at every turn and ensure that whatever expenditure they incur is concomitant with value derived.

According to media reports, the investigation includes among other things, three contracts that amount to R7.5-billion. It is indeed unfortunate that we have to spend even R1 on investigating corruption, but this is our reality.

However, an additional 1% margin on these three contracts alone would cover the fees spent so far.

story_article_right2

How could we reason that millions spent on the investigation is excessive when there are billions at stake? Even if one considers the fees too high, what option does Prasa's board have? Does it stop investigating corruption because the cost is too high?

Can you imagine how that movie will end, when thieves know that their corrupt acts won't be pursued because of costs?

Peters concludes her leaked letter: "I therefore ask that you close off this investigation process and consider the results or report thereof. A determination of any further investigation and a way forward will subsequently be made after studying the report in detail."

After board chairman Popo Molefe refused to stop the investigations, the minister's office "clarified" that it was not asking for them to be stopped - it just wanted them to be concluded speedily and to get a report on their progress.

Well then, why a letter that requests the investigations to be closed off?

Of course, all this is happening just a few days after the Presidency announced that it will now oversee certain state-owned enterprises.

I would love to think that all this is a mere coincidence, but an inner voice tells me otherwise.

Khumalo is chief investment officer of MSG Afrika Group, and presents "Power Business" on Power 98.7 at 5pm, Monday to Thursday