The PBO Director shortlist

The post of Director of the South African Parliamentary Budget Office (PBO) has now been vacant for almost two years after the previous Director resigned under a cloud.[1] That means two Parliaments (the 5th and 6th) have been in violation of their own legislation – the Money Bills Amendment Procedure and Related Matters Act (2009, amended 2018).[2]

I worked for two years at the PBO, leading some of its most important projects at the time, and have written at length in the past about its failures (e.g. on nuclear procurement), its importance, why the filling of the Director position is crucial and my own role in trying to remedy the institutional rot/dysfunction. Some of that accountability work is ongoing.

It took over a year for MPs to agree that the post should be advertised and almost a year has elapsed since then before the shortlisted candidates were finally decided on in a meeting on 4 September 2020. While it is possible that the Covid-19 pandemic delayed the process, it was already glacial prior to that and there was little impediment to finalising the list via a virtual meeting of the kind that eventually took place. The previous meeting of the committee took place in December 2019.

Given the broader political dynamics in the country, it seems likely that the delay has been the result of:

  1. Political lobbying as to who should be deployed to this post (paid at the level of a Director General but with only a small staff complement)
  2. Lack of prioritisation of the issue given widespread institutional challenges across all three arms of state and the relative disregard of the role of legislatures.

As reflected in the minutes of the Parliamentary Monitoring Group, there are 9 candidates on the shortlist. These include: the current chairperson of the Financial and Fiscal Commission (FFC), a former CEO and acting chairperson of the FFC, the current acting deputy director general of the Budget Office in the National Treasury, and all three current deputy directors of the PBO. Originally the committee staff had shortlisted 8 candidates but one further candidate (the Treasury official) was added during the meeting. The minutes of the meeting suggest some inconsistency in the application of the experience requirement, with candidates having 10 – 12 years experience being shortlisted and others with more years not being shortlisted. (This may be because of different notions of what constitutes experience for this purpose but it is not clear).

Candidates will need to go through a clearance process by the State Security Agency at the highest clearance category (‘Top Secret’). The discussion in the committee reflected the lack of knowledge of the PBO’s functioning among both the Parliament officials informing the process and MPs themselves. All parties appeared to be of the view that a PBO Director likely would not need to handle classified information. As the first staff member of the PBO to have received classified information through formal channels on behalf of the Office, I can attest to the fact that this is incorrect. What role the SSA should play in relation to this kind of process is of course another matter, since in principle it presents an opportunity for the Executive to interfere in an undesirable fashion (albeit that seems less likely under the current administration).

In principle, candidates should also meet the requirement of being ‘fit and proper persons’. [Declaration: this requirement followed from an amendment to section 15 of the Act which I proposed as part of a public submission in 2018 and was accepted by MPs]. In practice it is unclear at this point how this requirement will be checked. And whether information from the public will be solicited for this purpose. My view is that it should be: if you have any such information on any of the candidates, I suggest sending it to the secretary of the committee.

The nature of PBOs is such that it should be protected from political influence and partisanship of all kinds, not least in the appointment of its staff. Furthermore, whoever is appointed should be able to put whatever personal and institutional views they may hold, or have held, aside and conduct their analysis and research in a competent, fully public interested, non-ideological and non-partisan way. Unfortunately, this seems highly unlikely in the South African case. Instead, what is likely to happen is that the appointed candidate will be the one who is seen as most amenable to whatever the agenda is of the grouping(s) that holds the greatest sway over the appointment.

 A faction within the governing ANC along with some opposition MPs and civil society organisations will favour a ‘Treasury-aligned candidate’. (Note: this need not necessarily by a candidate from Treasury, though such candidates may well fit the bill). An alternative faction in the ANC along with other opposition MPs and different civil society groupings may favour a more ‘anti-Treasury’ view. There are 4-5 candidates who, in my view, can be reasonably located in one of these two categories. But one should also not rule out the possibility of an opportunist whose objective is really just to secure the post and sells themselves to one or both parties as necessary. As the reader will see, I am not convinced that any candidate is likely to be appointed who is squarely committed to what the role truly requires.

I will refrain from publicly speculating about how I think the process will, or should, play out in terms of the candidate who is ultimately selected. However, in the past I have indicated that given the historical dysfunction of, and misconduct in, the institution an outside candidate is likely to be preferable. And I continue to hold that view. Parliament partially sabotaged any such candidate by allowing staff renewals and appointments under a brief reappointment by the previous Director, thereby leaving any new Director with some staff who may be a liability. However, a suitably motivated and strategic new Director should be able to improve conduct and culture – as well as remove staff who resist that process.

The PBO is an institution with great potential to serve the public good. One can only hope that the current Parliament makes an appointment that puts it back on the right path, rather than consigning it to further stagnation and membership of a list of institutions with highly paid staff that do little for the public good. It is welcome that much/all of the process will be in the public domain. But as we saw with the appointment of the current Public Protector, transparency of that sort does not mean substantive transparency or guarantee a good outcome.

Note: I did not apply for the position in question and have no material or other interest in the outcome except to the extent that I am invested in the public interest role the PBO is supposed to play.

[1] This article incorrectly says one year.

[2] For those who don’t know: most legislation is introduced by the Executive and then approved by Parliament, but in special cases Parliament may draft legislation itself – most notably in relation to the conduct of its own affairs. The Money Bills Act is one of the few such pieces of legislation.

Commentary on VAT zero-rating

Since early 2017 I have been engaging with, and advising, some South African civil society organisations on public finance matters. While I naturally have my own views about many issues, the purpose of this engagement is really to help individuals in these organisations understand the issues well enough to make up their own minds. (Some other economists have the more specific agenda of influencing civil society organisations to support their – the economists’ – positions; an approach which I think is evidently dubious).

One important issue that arose with the tabling of the 2018 Budget was the increase in value-added tax (VAT) by one percentage point to 15%. My view on this matter was that there were major procedural and legal problems with how the increase has been brought into effect and that the National Treasury could have done more to protect poor South Africans from the incidence of new revenue measures. The position of civil society has subsequently honed in on the prospect of expanding VAT zero-rating and increasing various forms of social expenditure.

Some of the demands relating to social expenditure that I have seen seem loosely related to the actual VAT incidence claimed by Treasury, but that is a separate issue. More specifically, I recently argued -in an op-ed in Daily Maverick – that zero-rating itself could be of limited value or even counterproductive. A version of that piece with hyperlinks is provided below for anyone interested in reading some of the background references.

Unfortunately, it appears that no-one currently has the appetite to challenge/query the constitutionality of the VAT Act.

Continue reading “Commentary on VAT zero-rating”

Submission to Parliament on Money Bills Act amendments

The Money Bills Act is the legislation that guides Parliament’s oversight of South Africa’s budget and related legislation. I have written previously on that process. The Act has been up for review for some time, and the finance and appropriations committees have had a number of meetings recently to finalise that process. The result is a draft amendment Bill, which I have attempted to explain in an accessible way.

Further to that article, I submitted written comments and made a presentation based on those this week. The audio, relevant documents and meeting report will appear on the relevant Parliamentary Monitoring Group (PMG) website in due course. Access is restricted though, so here are the slides and written submission.

Unfortunately the very limited time available between the call for comments and the deadline for submission (two weeks) also placed some limits on the depth of the analysis. One issue I neglected to address, which was raised by the opposition in the meeting, is that the current Act emphasises – in clause 15(2) – that the PBO should take its work from committees. That is potentially problematic where committee decisions are ultimately determined by a majority party.

Unfortunately, this point became politicised due to disagreements about whether the current committees had allowed partisan considerations to determine what work requests were sent to the PBO. My view is that regardless of what one thinks about the current situation, it is certainly not hard to envisage a situation in which a hypothetical majority party uses its weight on committees to ensure that potentially inconvenient work is not sent the PBO’s way. That could significantly reduce the usefulness of the Office. The broad point I made in my presentation is that our institutions should be designed to be robust to such scenarios. It is for that reason that I agreed with the suggestion that this clause should be amended, or that the clause allowing work to be taken from individual MPs “subject to capacity” – clause 15(3) – be amended to allow the Director discretion based on importance of the request.

It will be interesting to see the final conclusions reached by MPs in relation to these issues and proposals. Given the calibre of MPs on both the majority party and opposition benches on these committees, I am cautiously optimistic that decisions will be taken in the long-term national interest.

Statement regarding the Parliamentary Budget Office and recent CCMA award

The Parliamentary Budget Office (PBO) was established to provide Parliament with independent technical advice to support it in exercising oversight of public finances. The importance of this role should be evident given the recent Cabinet reshuffle and ratings agency downgrades, which have raised concerns about public debt, public service pension funds, a prospective nuclear deal and the finances of state-owned enterprises amongst others. These are all matters about which a functioning PBO would be expected to provide credible insight and guidance to Parliamentarians.

There are, however, serious concerns regarding the functioning of the Office. These relate to the content and objectivity of its advice. This became apparent to me shortly after I joined the PBO in 2014. The resulting dynamics in the office led me to resign in 2016, and were also the basis for an unfair labour practice complaint brought against the PBO at the CCMA.

On the 26th of April 2017 the CCMA issued the commissioner’s award, which did not find in my favour on the narrow labour issues raised. While I am disappointed with this outcome, it is important to place the case in the broader context of the need for a competent, functional and credible PBO that is beyond reproach. In this regard, the Commissioner held that – as I had testified – the Director of the PBO had indeed offered to provide me with the interview questions for the position, I had declined the offer, and he had lied about this in his testimony (i.e. under oath). This example was only one of a number of issues raised in the process, but on its own raises very serious questions about the functioning and management of the office.

The Act governing the PBO is expected to be reviewed and amended later this year. In that process, the end goal must remain paramount: to build an independent, technically and ethically credible institution that the public and Members of Parliament can rely on for non-partisan analysis of public finance issues that is conducted without fear or favour.

Internationally, similar institutions are expected to maintain the highest standards of objectivity and political neutrality; standards that the South African PBO has failed to demonstrate. Perhaps the most famous international example is the Canadian PBO, which in 2011 produced a costing for parliamentarians of the government’s fighter jet procurement plan that was significantly higher than the estimates the government had published. The Office was attacked by the Prime Minister at the time, but supported by society at large and subsequently vindicated: government eventually acknowledged that the costs were higher than originally stated and the procurement remains on hold. The Canadian example is in marked contrast to the South African PBO’s analysis of the desirability and feasibility of the proposed nuclear energy procurement. The PBO’s report failed to cost the project, or assess its implications for public finances. In a more recent example from Kenya, the country’s PBO raised concerns about omission of a large increase in debt repayments from budget documents.

Since some of the issues raised at the CCMA go to the heart of these expectations, and it is my view that the basis for its finding is deeply and materially flawed, I am considering taking the award on review to the Labour Court. This is an expensive option – the estimated cost is R500,000 or more, and is prohibitive for an individual. However, the basis on which staff are appointed to, and promoted in, PBOs is one of the most critical factors in their success. Combined with the importance of the PBO and the upcoming amendment of its governing legislation, public interest organisations may find this case to be an appropriate mechanism through which to contribute to the establishment of the kind of PBO the country deserves.

Presentation to Parliament’s finance committees

I am now affiliated to the new Public and Environmental Economics Research Centre (PEERC) at the University of Johannesburg, within which I intend to continue putting my public finance and public economics knowledge to good use.

As already noted, I recently published an article on the legislative process that guides the adoption of Budget proposals by Parliament.

And this week, along with my colleague Jugal Mahabir (who has experience at National Treasury and the Financial and Fiscal Commission), we made a short presentation to the finance committees on the fiscal framework and revenue proposals.

The time available (4-5 days between the tabling of the Budget and the submission of public comment) limits the depth and sophistication of the analysis, but with greater preparation this is something I hope to improve on at each successive iteration.

My case against the Parliamentary Budget Office: part II

As noted in a previous post, I am pursuing a case against the Parliamentary Budget Office at the CCMA.  And as also indicated in that post, I am not going to comment on any specific issues relating to the merits of the case, or the process, until the latter is completed. Nevertheless, given that the reporting of the matter has been intermittent and only partially informed, it is useful to recount some further, basic information here.

The most recent component of the hearing (day 5 and 6) took place on the 19th and 20th January, with the intention that the matter be completed on the 20th. Unfortunately that was not possible, for reasons which will become known in due course.

Media presence

More importantly, while the media were initially granted access, the two journalists present were requested to leave shortly after I started my cross-examination of the Director of the Office. The result is that the first two reports (News24 and Business Day) that did appear could effectively only report on 75% of the 5th day of the process and did not report any of the content of the Director’s cross-examination. One article reported the Director’s assertions, but not the testing of these assertions and more substantive issues; resulting in somewhat one-sided coverage.

While the media can only report what they observe, one might expect that the media’s (gentle) ejection from the process would be reported to at least provide readers with some context for the sudden cessation of coverage.

Meanwhile, in another case at the CCMA, the media have continued to be present despite the applicant (Mr Adrian Lackay) testifying to fairly sensitive matters, such as the alleged ‘rogue unit’ at the South African Revenue Services (SARS). Of course, every case is different and commissioners use their discretion to make such determinations. It is worth noting, though, that Lackay’s case led to the breaking of new ground on media access to CCMA arbitration thanks to work by Media24 and amaBhungane. Apparently the Commission has subsequently published rules and guidelines that formalised the position that public access, including media access, is the default. (Though many people, including legal practitioners, remain unaware of this).

Credibility

Naturally, when one raises matters like those that have emerged in this process, attacks on one’s credibility are par for the course. Exposing, directly or indirectly, the abuse of public resources and compromising of appointment processes to positions in public institutions is a sure way of engendering some hostility. In this instance, such attacks have come in blustered form within the process from Parliament’s representatives, statements by the Director (to the media and in testimony) and comments by one former colleague in testimony.

While such behaviour is to be expected, it remains very ill-advised to attack the credibility of someone who is, substantively, more credible than you are… In due course most of the truth about who acted professionally and ethically at the PBO, and who did not, will become known. It will then also become clear that serious action will be required to salvage some credibility for the institution.

A long road ahead

It is widely-accepted that independent fiscal institutions like parliamentary budget offices need to be beyond reproach:

the core values that IFIs both promote and operate under – independence, non-partisanship, transparency, and accountability – while demonstrating technical competence and producing relevant work of the highest quality that stands up to public scrutiny and informs the public debate (OECD Principles)

Unfortunately, it would appear that there is a long, difficult road ahead to achieve this in South Africa.

My case against the Parliamentary Budget Office

It is now (as of this week) a matter of public record that I am pursuing a public interest-related labour law case against the Parliamentary Budget Office. The arbitration hearing at the Commission for Conciliation, Mediation and Arbitration (CCMA) began, in fact, on the 19th of September. Unfortunately, no media were present to hear the beginning of the case. That included my introductory statements and extensive arguments on the legislated independence of the Parliamentary Budget Office (PBO) from the Parliament administration, as well as the labour law and public interest aspects of the case (first day), and my testimony under oath (second day).

The matter then continued for a further two days on the 14th and 15th November. This began with my cross-examination by the PBO’s representative, and then continued with my calling of witnesses.

As I indicated in the hearing, I expected that the witnesses I called would be hostile but was guided by a CCMA award in which the commissioner noted that a party cannot fail to subpoena a relevant witness merely because they expect the witness to be hostile “as this can only be determined when the witness is giving testimony”. Unfortunately, despite the apparently hostile statements by witnesses referred to in various of the articles below, not one of the witnesses was declared hostile and I was therefore unable to cross-examine them.

I will refrain from commenting on the substantive details of the case at this stage, though I will certainly do so at some point after it is completed. For now I would just note a few interesting snippets from the articles produced by the Media24 journalist in attendance. (There are some important legal points that were not reported, and some errors in the articles, but I will not comment on those either at this stage).

1. Note on media access at the CCMA

Media24 requested access to the hearing. Parliament’s representative objected and I argued in favour. I specifically argued that the recent ruling in the KZN High Court allowing media into the Nkandla disciplinary cases indicated the extent to which public interest must inform such decisions. CCMA arbitration hearings must surely be more open than internal disciplinary hearings. As it transpired, the CCMA takes the view that arbitration hearings are open by default unless there are reasons to decide otherwise.

2. Some of the issues

Muller told the commission that while no one had ever approached him to do academic work, others were asked.

Others in the office were favoured because they had helped do political work, including write speeches, which were not part of the office’s mandate.

He accused the unit’s director, Mohammed Jahed, of instructing staff to do such work and even boasting about it. If Jahed denied it, he would be lying under oath, Muller said.

3. How do emails go missing in an institution like Parliament?

All emails from 2015 had been deleted, she said. This would be because her mailbox was full, she said, as other colleagues could also not find old emails.

She did not know if they were deleted because of Muller’s case, she told CCMA commissioner Madeleine Loyson.

[It was noted in the hearing, however, that Parliament’s email policy states that:

8.5 Storing, archiving and deleting e-mail messages

a) Official email messages must be archived after 30 days of receipt and all other e-mail must be deleted from the inbox/outbox after 24 days of receipt.]

4. What constitutes acceptable assistance to MPs?

Ellse explained that all he had done was give tutelage to some MPs in issues relating to tax and other areas in which he was interested.

He had been asked by the PBO’s director to have a look at questions from Van Rooyen and provide guidance if he had time.

After reading the questions, he said, he had then decided to explain a related concept to Van Rooyen.

5. Is considering the performance of internal candidates unfair when making appointments to senior technical positions in the public service?

Gabier told the commission that including internal candidates’ performance scores would have prejudiced external applicants.

As things stand, the hearing will proceed on the 19th of January 2017. The cross-examination of Ms Gabier will continue, followed by the testimony of the Director of the PBO and his cross-examination.