Covid-19 hits the KZN economy hard
● Unemployment could rise to 40% ● Covid-19 expenses an estimated R1.38bn ● Demand for goods and services drops by 7.5%
THE KwaZulu-Natal treasury warned it would be closely monitoring Covid-19 expenditure by municipalities, public entities and other departments, as the emergency procurement regulations could leave the public purse open to abuse.
Preliminary, unaudited figures show that the province has spent about R1.38 billion, as of May 15, on Covid-19-related items and services.
The provincial Health Department had the highest expenditure, at R1.2bn.
Finance MEC Ravi Pillay presented a R718.7 million budget vote for the 2020/2021 financial year during a virtual meeting with the provincial legislature yesterday.
Pillay said the treasury’s preliminary projections indicated that the effects of Covid-19 would be detrimental across all sectors of the economy in KwaZulu-Natal.
“However, the hardest-hit industries are manufacturing, construction, wholesale, retail, hotels, finance, real estate, business services and personal services,” said Pillay.
He added that the scourge of Covid19 was expected to cause the overall demand for goods and services to drop by about 7.5% in the province.
The provincial GDP is expected to contract by approximately 8.5%, with employment falling by a staggering 14.6% this year.
“The contraction in the provincial economy will ultimately result in a further increase in the official unemployment rate of 25%, to reach a possible high of 40%.
“This is not good news, particularly as the province has already close to a million unemployed people, excluding
discouraged work seekers,” he said.
Looking at the financial year ahead, Pillay said their focus remained on addressing audit matters, taking effective steps towards the elimination of fraud and corruption in the government, ensuring transparent and fair supply chain management practices, and monitoring all Covid-19 emergency procurement.
“Our main aim is to ensure that the province remains financially stable and delivers adequate services to the people of KwaZulu-Natal to address the triple challenges of poverty, unemployment and inequality,” he said.
An estimated R156.49m will be pumped into the department’s internal audit programme.
Pillay said several audits were planned for the 2020/2021 financial year, which included full-scope reviews of processes and programmes.
He said a significant amount of time would also be spent on determining the extent to which departments had implemented previous recommendations of findings from both internal audits and the auditor-general.
“The effectiveness of any audit function is dependent on how active management is in effecting the required and recommended improvements,” he said.
Additional focus would be given to financial statement processes.
He said the Forensic Unit would review the interim financial statements prepared by all departments and provide management with recommendations to improve the quality of financial reporting.
Supply chain management, including contract management, would also continue to be an area of focus for internal audits, with thorough reviews being conducted across all departments, he said.
“Concerns relating to irregular expenditure, through these audits, if reported timeously, may be prevented if recommendations to management are implemented.
“Another transversal high-risk area that will be audited regularly is the performance-information reports produced by departments,” he said.
The Audit and Risk Committee, which plays a crucial role in the internal audit value chain, will continue to be supported by the unit.
Pillay said they were looking into beefing up the size of the committee as additional expertise was needed.
He highlighted the committee’s successes, reporting that the Forensic Unit had 449 investigation requests from December 2009 to March 31 2020.
The majority of investigation requests related to supply chain management irregularities and fraud.
Pillay said that approximately 83% of the investigation requests received were investigated and completed, and those that warranted criminal investigation were referred to law enforcement agencies for further investigation.
The remaining 17% of alleged corruption and fraud cases reported were under investigation.
Recently, the Forensic Unit was able to successfully initiate a recovery order to the value of approximately R547m through the Asset Forfeiture Unit in one of its matters, he said.
“While the provincial treasury will play its part in the management of financial and fiscal resources, accounting officers and accounting authorities must also play their role in the management of our resources. Ultimately, the responsibility lies with the accounting officer of each department,” Pillay said.
The department allocated R219m to its Financial Governance Programme, which had developed an Audit Readiness Financial Management Support Plan and had set a target of achieving 90% unqualified audit outcomes by 2024.
The Municipal Finance Management Unit would receive R76.7m. This unit provided oversight, technical support and guidance to help municipalities manage their financial resources prudently and sustainably.