Mboweni hails Sadc public financial management law
Tito Titus Mboweni, the first black South African to hold the post of Governor of the Bank of South Africa, has described the development of the Sadc Model Law on Public Financial Management (PFM) as “laudable”, but stressed that political will would either make or break the initiative.
Mboweni was the keynote speaker last Tuesday during a virtual consultative meeting convened by the Sadc PF to enable representatives of central bank governors of Sadc member states to critically consider a draft of the Sadc Model Law on PFM ahead of its adoption.
Mboweni, who served as Finance minister of South Africa from 2018 to 2021, stressed that a PFM law cannot achieve much without the acceptance and active support of a country’s political leadership, specifically the presidium and cabinet.
“We need first to understand very strongly that any law that is passed by Parliament has its origin in the political approach of the political leadership. If the political leadership is determined to see a progressive PFM Law, we are going to have that in place. If not, then we might as well be wasting our time,” he said.
He argued that a PFM law must be the political expression of the direction in which the government wants to take the country and must be aimed at prudent financial management.
He contended that the collection of revenue for the government must be based on a tax system that inspires citizens to contribute to it.
“If the citizens feel that the tax system is in their favour, they will be willing to pay the tax. If they feel that the tax they pay goes to corruption, they would be unwilling to contribute,” he articulated.
He said political will would make it easy to draft a PFM law and establish a national treasury with a number of functions, in particular debt management, which he said was important in most Sadc countries.
Mboweni maintained that a good PFM law would enable member states “to channel public funds where they are supposed to go and for the purpose for which they have been raised”.
All member countries of the United Nations, including those within the Sadc region, have adopted a resolution aimed at achieving sustainable development by the 2030 through 17 Sustainable Development Goals (SDGs) and attendant 169 targets.
National budgets are potent tools in ensuring that policies and priorities of governments in meeting the needs of citizens are implemented.
The active involvement and informed oversight of parliaments is thus necessary to achieve improved public expenditure effectiveness, efficiency and equity in delivering socioeconomic policies that can meaningfully benefit all citizens.
With this in mind, the Sadc Parliamentary Forum is developing a Sadc Model Law on PFM to promote good governance, entrench democracy and promote prudent use of public financial resources which governments raise through taxes, donor funds and other initiatives.
Mboweni said when he was Governor of the Reserve Bank of South Africa, he advocated for the adoption Sadc model central bank law to support the basic functions of central banks.
“Monetary policy is the central function of the central bank and the independence of the central bank rests on its ability to manage monetary policy without interference of government,” he explained.
As the Sadc Model Law on PFM takes shape, the independence of relevant frameworks like the Office of the Auditor General, the Accountant General and oversight parliamentary committees like the Public Accounts Committees has become topical.
Mboweni drew parallels between the Central Banks Model Law and the evolving Sadc Model Law on PFM and said the former included provisions on the appointment and removal of the governor of the central bank.
“The appointment of the governor must be open and transparent and the removal must be done by a proper board that must investigate the transgressions — if any — that the central bank governor has committed and make recommendations to a Parliamentary Committee, which would then write a report to the president.”
Mboweni’s view was that a common central bank law in which independence is embedded can enable the Sadc region to move towards monetary and economic convergence as well as a common monetary regime.
He said that whereas central banks play a pivotal role in public finance management, a good PFM framework enables the allocation of funds to different departments through the budget office, which must also take care of managing the budgetary process.
He suggested that the Sadc Model Law on PFM should help link the powers of the national treasury and the work of the auditor general, who is required to verify whether the PFM has been properly adhered to.
On debt management and funding of the work of the government, he recommended that central banks desist from directly financing the government as that would negatively affect the currency market.
Mboweni said the success of the Sadc Model Law on PFM would hinge, also, on the seriousness with which member states confront corruption.
“Corruption eats into all that money that our laws are trying to manage. So, side-by-side with a good PFM law, must be a very strong anti-corruption legislation that will be mutually reinforcing for the citizens of Sadc,” he said.
In general, the consultees welcomed the draft Sadc Model Law on PFM.
From Eswatini, Mduduzi Matsebula described the draft as “comprehensive” while Toka Sello from Lesotho commended it for providing guidance on public debt management and cryptocurrencies.
George Chioza from the Reserve Bank of Malawi (RBM) said developing model laws was “a step in the right direction”.
“Model Laws have really helped. We are looking at the Central Banks Model Law as well as banking legislation and these have gone a long way in helping member states of Sadc to update or improve their local legislation.”
Chioza said some of the challenges of PFM had to do with enforcement.
“When I look at the local context, I see that the law is there but enforcement - the sanctions regime — sometimes is a problem,” he noted.
Agnes Sentala, also from RBM said they had just concluded reviewing Malawi’s PFM Act had been reviewed in the recent past and would draw from the Sadc Model Law on PFM once it is adopted. She, however, suggested that the drafter expands the general definitions section.
For Webster Madera from Zimbabwe, the draft model law was impressive.
“We have found that the text of the draft Model Law on PFM is flowing. Everything is in order; quite clear, flowing and espouses the principles of transparency and accountability,” Madera said.
Sadc PF secretary-general Boemo Segkoma said consultations with different stakeholders on the draft would end in April. A joint committee of parliamentarians of the Sadc Parliamentary Forum will pore over the draft following amendments and synthesising by a technical working group helping the legal drafter Daniel Greenberg, CB, craft the soft law.
The joint committee would then recommend the model law on PFM to the plenary assembly, the highest policy making organ of the Sadc PF, for adoption. Once adopted, it would be circulated to all stakeholders for consideration and domestication.