Guest lecture by AG Tsakani Maluleke on “Guardians of the Purse: Bridging the Gap Between Financial Compliance and Public Value in South Africa”

Hosted by the North-West University School of Business Studies on the 11^th May 2026 at North-West University (NWU) Potchefstroom Campus

Ladies and gentlemen

I am delighted to have this opportunity to address you, particularly young people aspiring to join our prestigious accountancy profession. Thank you to the University of the North West for the opportunity and the gracious invitation to deliver this.

As you might be aware, the Auditor General of South Africa, an institution I have the privilege to lead, is an accredited training institution by the South African Institute of Chartered Accountants (SAICA), therefore any opportunity to interact with aspiring accountants I embrace as it fits in with our objectives of creating a talent pipeline for our 115-year-old supreme audit institution.  This is an open invitation for you to join our training programme and our institution when you qualify.

The lived reality of the citizen

A scenario that is not too unfamiliar for many South Africans, unfortunately, is that you wake up in the morning perhaps to get the kids ready for school, perhaps to get ready for work or school yourself, you get out of bed, turn the taps and nothing comes out. There’s no water. What that sets off is a chain reaction of discomfort at possibly having to go to school or work without having a proper bath or shower, or the inconvenience of having to find out if there is a water tanker that has been arranged and what time it is going to come around, or the added costs of having to drive to a friend’s house, the gym or to get your shower.

This is just a simple scenario of you at your home or at res but let us also consider that at that time that you are irritated that there is no water which means that you can’t take a shower that morning. For the hospital down the road, the implication is a lot more dire than that – they have patients going into theatre and some of the machines that they run require water to be available failing which those life-saving procedures cannot happen. That right there, fellow South Africans, is what we, at the AGSA, describe as your lived experience as a citizen.

I want you to pause and ask yourself, when the water fails to run, has the municipality committed a breach of contract? 

You might then ask yourself, what is the nature of that particular contract that I am referring to that has created the legitimate expectation in you that if you turn the taps then water should come out? Well, the answer is more layered, nuanced and profound than you might, at first, think.

Contrary to where you thought that I might be going with this, in pure private contract law terms, the likelihood is that the municipality is not in actual breach of contract. The “contract” or service agreement between you as a resident or ratepayer and the municipality largely finds expression through the by-laws of that municipality. That service agreement will, on the one hand, provide that you will pay your rates, taxes and service charges failing which then the municipality may cut your water supply. On the other hand, though, in almost all cases, there will also be a clause in the same by-laws that clearly states that the supply of water by the municipality shall not constitute an undertaking by it to maintain at any time or at any point in its water supply system a specific pressure, a continuous supply or a specific standard of quality of the water. So, by this measure alone, you might be forgiven for arguing that they are not actually in breach of contract because that particular exclusion clause clearly gives them an out of maintaining a continuous supply or specific standard of quality of water.

While it may, indeed, be true that the municipality has not actually breached its service agreement with you it is also true that you knowing that does not in any way make you less frustrated, less inconvenienced and less disappointed at their failure to meet your legitimate expectation for water. You knowing that does not in any way mitigate the indignity of having to potentially go about your business of the day unbathed. This is because while the by-law might give them an out of the strict legal contractual obligation, it does not give them an out of the broader and, dare I say, more fundamental psychological contract in which your trust in the municipality is vested such that the more that they disappoint you in not supplying you with the water the less and less that you trust them to do so. So while they may not end up losing a court case for failing to supply you with water what they do lose is more fundamental than that – they lose your trust.

Is the loss of trust by citizens in the public administration something that we should be worried about, especially given that the world at large is experiencing very low levels of trust in societal institutions across business, government, media and civil society? I ask.

How that loss of trust then manifests is that over time, if you have the means, you decide to dig a borehole or install Jojo tanks and set yourself up with an alternative water supply system where the municipal supply of water becomes your exception rather than your rule – you opt out of public services, you opt-in to private supply and with that the municipality loses the amount that you used to pay for the services. While for you it is one less bill to pay, consider what then happens when more and more residents, like you, begin to do the same as you and that one bill that you opt-out of becomes added to those of others. The municipality ends up collecting less and less revenue and when that happens it means less money goes into its coffers which means that its ability to continue to sustainably do its work of service delivery, or to subsidise indigents and the elderly or to afford to employ the number of people that it does, becomes more constrained. 

Unfortunately losing your trust and then subsequently losing your monthly payment of service charges which translate into revenues for them is not where it all ends. It also means that the municipality loses your vestedness in the affairs of the municipality or those of the community. Because you have made a plan for an alternative supply of water when there is no water in your community you are not affected and so you are less concerned and what that begins to cause is an even more dire and insidious problem for not just the municipality but the country as a whole because it begins to result in social fragmentation and an erosion in social solidarity – those that have the means no longer involve or concern themselves with the issues that affect the rest of their communities and so social cohesion and unity break down. You begin to have communities and a municipality of haves and have nots, a more insular and self-interested type of politics takes over where the various fragments of society begin to fight not for the common good of all in that community but rather for their own, individual interests even if they come at the expense of the collective. The communal mindset of win-win very quickly becomes replaced by the individualist mindset of win-lose. Kamina Kawena very quickly turns into Kamina Kamina.

I’m afraid that it only gets even worse. Not only has the municipality now lost your trust,  the revenue that ought to fund service delivery and social cohesion and solidarity – the foundations of the country’s very constitutional democracy begin to fracture because:

• In the Bill of Rights access to water is enshrined as a constitutional right yet your municipality routinely terminates that access thus undermining your right and thus your confidence that what is in the Constitution is indeed supreme;
• In the preamble of our Constitution we commit to improving the quality of life of all citizens yet, what kind of a quality of life is it and who wants a quality of life where they do not have running water?
• In the preamble of our Constitution we commit to freeing the potential of each person, yet how can you focus on the hard work that is necessary for you to free your potential when your life is still dominated by a struggle for the most basic of needs such as water?
• In the preamble of our Constitution we commit to building a united and democratic South Africa, yet when societies start to fragment and we lose social cohesion it means that we are moving in the opposite direction to the unity that we are meant to be building
• In the Bill of Rights we affirm that everyone has inherent dignity and the right to have their dignity respected and protected yet, what dignity is there in having to go about your day unwashed and teeth possibly unbrushed as well?

What then follows is that increasingly as people see more and more of a disjuncture between what the Constitution aspires to, promises and enshrines as rights vs what their own lived experiences are they not only opt-out of basic municipal services, they begin to opt-out of the very Constitutional democracy that underpins our nationhood. They stop participating in elections. They stop respecting the rule of law and take the law into their own hands and making up their own rules of who, for instance, should or should not be living, working or walking in particular areas. They stop paying taxes.

And when all of that and more happens, the Constitutional consensus that was so hard fought for with the blood, sweat, tears and lives of millions of our people – crumbles and fails.

What I therefore hope is becoming clearer is that the stakes are much, much higher than just whether you open a tap and manage to take a shower or not; I hope that it is clear how that failure of service delivery, when it happens routinely and frequently enough, materially undermines citizen confidence in the public administration and ultimately becomes a threat to our constitutional democracy.

I further ask, why is it that in spite of the stakes being as high as they are, there is no water in the taps? 

The answer to that is both simple and complicated.

It is simple because it can only be one or more of five key reasons:

• Existence
• Eligibility
• Availability of resources
• Economic procurement of resources
• Efficient and effective utilisation of resources

Let me unpack them for us:

• Existence: It could be that the service does not actually exist in the way that you expect it in the area that you are in because while the Constitution does indeed enshrine the right to access to water, it is also clear that it is a progressive right and that access to water does not necessarily mean that the water should be accessible through your taps at home if alternative means of supply close to your home such as water tanker trucks and communal taps are available.
• Eligibility: It could be that you do not actually qualify to receive the service in that perhaps you have not been paying for your services and that they have thus been terminated, meaning that while your account remains in arrears you will not receive them.

It is, of course, obvious that in our example both of these would fail as reasons because your legitimate expectation that if you turn the taps water will come out is based on the fact that water normally comes out of those taps confirms that : (a) the service actually exists and (b) you have no reason to believe that you have been cut off and thus the legitimacy of your expectation. So let’s then look at the remaining reasons more closely, especially because I believe they bring us closer to engaging more directly with the theme of guardians of the purse:

• Availability of resources:  It could be that the quantity and quality of resources needed to supply the water are just not available. This, for instance, could be the case where the municipality has run out of money because it is not collecting rates, taxes and service charges as diligently as it should; or ratepayers have opted-out of certain public services thus reducing the municipality’s revenue base; or most of the municipality’s budget is going towards paying the salaries of administrative staff and so there is little money left to pay for the actual service provision.
• Economic procurement of resources: It could be that the municipal budget is actually sufficient to afford to maintain a consistency of service supply but that because the municipality has overspent on its budget because it has paid more for products and services that it acquires than what they are actually worth, they have run out of money.
• Efficient utilization of resources: It could also be that there is a sufficiency of the quantity and quality of resources required to supply the service but that those resources are not used efficiently, for instance workers being paid to do particular work but not being monitored and managed appropriately .
• Effective utilization of resources: It could be that there a sufficiency of the quantity and quality of resources required to supply the service but that the people who need to be using the resources lack the appropriate skill to use them effectively which results in poor standards of maintenance.

So there we have it – on any given day where you or anyone else fails to receive a public service that you have legitimate expectation to receive, amongst these reasons lies the definite, unambiguous answer why that is the case.  It is that simple and underscores the fact that quite often when these service delivery failures happen we get given the impression that the reasons are hard to find but in more cases than not, the reasons are actually quite obvious and simple and sit somewhere amongst the six reasons that I’ve just explained.

So why, then, do I say that it is as simple as the reasons, but that it is also complicated? 

What makes it simple yet complicated to answer the question of why it is that in spite of the stakes being as high as they are, there is no water in the taps – is that there is actually a seventh reason, one that is most fundamental and drives the persistence of the other six reasons.

What is the seventh reason? 

The seventh reason, the one that is most fundamental and drives the persistence of the other six reasons is : human behaviour. When the water fails to come out of the taps when you legitimately expect it to then the reason for that could be that the service actually does exist and that there is sufficient resources of the required quality but that those who are supposed to manage those resources have not, in fact, taken appropriate and adequate measures to ensure the availability of service.

In summary, it may be that there is nothing inherently wrong with the water supply infrastructure but that the issue in fact lies with humans that form part of that water supply system who have failed through negligence, malice or incompetence to do the jobs that they have been paid to do and as a result the taps have run dry.

Let me say that again : it may be that there is nothing inherently wrong with the water supply infrastructure and that there is in fact sufficient quantity and quality of resources but that the issue in fact lies with humans that form part of that water supply system - particularly those in leadership - who have failed through negligence, malice or incompetence to do the jobs that they have been paid to do and as a result the taps have run dry.

Let me spend a bit more time focusing on two aspects of this particular reason that I’ve been asked to unpack in a bit more detail:

Ethics relates to the simple notion of : doing the right thing. When you are asked to act ethically, what you are, in simple terms, being asked to do is to do the right thing. When you look at current trends in South African public administration, particularly through the lens of audit, you get the picture of a public administration that is mostly struggling with engendering a culture of consistently doing the right thing, though there are pockets of excellence here and there. Looking at the trend of audit outcomes over the past 5-years what you see is that the majority of municipalities and high-impact state institutions continue to perform poorly, with widespread irregular expenditure, weak internal controls, non-compliance with legislation, poor record-keeping and limited consequences for misconduct. Where there have been improvements they have often not been sustained. In the 2023/24 local government report 83% of municipalities failed to comply with key legislation and municipalities incurred approximately R87-billion in irregular expenditure over the three-year municipal administration period. Service delivery has also been deteriorating as characterized by water and sanitation failures, electricity interruptions, deteriorating infrastructure, declining municipal financial health and growing public dissatisfaction and protests. Only 15% of municipalities nationally managed to achieve clean audits and municipalities reported approximately R14.89-billion in water losses just in the last audit cycle while 74 municipalities exceeded the national 30% water-loss threshold. 46% of municipalities also had unsafe drinking water systems and 99% of wastewater treatment plants failed at least one compliance standard.

What these dire statistics point to is that if we perceive the law to be that which serves as the basis of what is good in terms of public administration, then the outcomes of performance, accountability, transparency and institutional integrity that my office has been reporting on over the years show that there is a real struggle within our state institutions to engender a general, dominant culture of doing good or behaving ethically.

What, for instance, is the right thing for an Accounting Officer to do when the water supply in her municipality has been interrupted due to a massive leak and where following the legally prescribed procurement process – the process designed to optimally mitigate risks of uneconomic procurement of resources, inefficient and ineffective utilization of resources - to acquire the materials and services necessary to fix that leak will take a month to finalise? What is right for the Accounting Officer to do then? To follow the legally prescribed procurement process while residents go without water for a month, or sign a deviation or allow for an expedited process that she will later condone?

The ability to navigate such dilemmas is what, in many ways, distinguishes us from machines which generally operate algorithmically and in binary terms and in a world of AI, it is the tasks and questions that carry most moral ambiguity that will fall to you as the human in the system while the machines take care of those that have clear cut binary answers. Developing and strengthening your ability to navigate such ethical dilemmas will thus stand you in good stead in your own future career because these ethical dilemmas are everywhere and no less so in the public administration.

They are called dilemmas because one can’t provide a simple answer to them. Yet there are ways of navigating them and a lot has been studied and written on the subject that I’d urge you to go and engage in further study of, save to say that one of those ways of navigating ethical dilemmas that I personally find compelling is the one referred to as the categorical imperative, as coined by German philosopher, Immanuel Kant – it stands on the following central principle : act only according to that maxim which you can will to become universal law. In simple terms that means that before you act, you should ask yourself if you would be happy to live in a world where everyone behaved in the same way that you do. If you, for instance, are a person who blows your nose and then throws the tissue paper on the floor, would you be happy to live in a world where everyone also blew their noses and threw them on the floor instead of the bin? The answer to that question should then assist you to resolve most of what you would experience as ethical dilemmas.

On corruption, if you read the Prevention and Combating of Corrupt Activities Act (PRECCA) – as I imagine many of you might have - you will see that corruption is said to occur when a person directly or indirectly gives, offers, accepts, or agrees to accept any gratification in order to act improperly, dishonestly, unlawfully, or in a biased manner in the exercise of power, duties, or authority. So in simple terms and to link it to the conversation of ethics – if you give or receive any benefit to someone to act improperly, dishonestly, unlawfully, or in a biased manner in the exercise of their duties or authority then you are acting corruptly whether you are giving a traffic officer cooldrink to get out of a speeding ticket or you are paying someone’s children’s school fees so that they can direct a tender to you or you are demanding that someone sleeps with you in order for you to give them a job then you are committing corruption, whether or not the parties involved work for the government.

There are a multitude and inexhaustive ways in which corruption shows up in the public service and so it is quite difficult to try and provide you with a comprehensive list of corrupt activities that we come across in the course of our audit – what might, perhaps, be more helpful and an easy way for you to figure out the various ways in which corruption manifests is to go back to those reasons that I addressed earlier for why there is no water in the taps and to note that any time where those reasons – Existence, Eligibility, Availability of resources, Economic procurement of resources, Efficient utilization of resources, and Effective utilization of resources -  materialises because someone, somewhere has directly or indirectly given, offered, accepted, or agreed to accept a gratification in order to act improperly, dishonestly, unlawfully, or in a biased manner in the exercise of power, duties, or authority then you have corruption.

Let me give you an example of what we’ve come across in our audits and how they relates to the framework I’ve provided you:

In October 2019, the department appointed a contractor to construct 300 low-cost houses for residents of Tladistad in Moretele. The project’s expected completion date was January 2021 at a cost of R38,18 million. The accounting officer approved the extension of the contract by R7,03 million without an increase in the scope of work, but could not provide evidence of valid reasons for the extension as assessed by the adjudication committee. The non-compliance with the PFMA resulted in irregular expenditure of R29,50 million.

The project has been delayed by more than four years and only 102 of the 300 houses have been certified as complete. The project cost is almost at 75% of the initial contract value, but the project completion is standing at only 34%. Our audit also identified weaknesses such as poor workmanship as roofs were not constructed per the specifications.

Due to financial constraints, the department instructed the contractor to reduce the number of houses to 258 and complete only works already in progress. The contractor rectified roof defects on only 13 houses, for which R195 000 was paid. Owing to slow progress, the department issued a letter in February 2025 that required completion by September 2025, failing which the agreement would be terminated. The 198 intended beneficiaries have not received a decent structure to raise their families and the public has not derived the value associated with the spending. 

So the question is whether there has been corruption and the answer is that what is clear is that there has been a failure to procure resources economically, the project cost is at almost 75% of the initial contract value and yet project completion is only at 34%. It is also clear that resources have not been utilised efficiently or effectively given the defective houses that have been supplied and the material cost and time overruns that have been incurred.

That on its own cannot definitively confirm corruption though. It may be negligence, it may be incompetence, it may be that there were good reasons, maybe lots of rain, that has caused project timelines to be extended.

To conclude that it is, in addition to all of that, corruption, the key test would have to be whether anyone directly or indirectly gave, offered, accepted, or agreed to accept any gratification for those failures to procure resources economically and to use resources efficiently and effectively to materialise. If that is the case then corruption would have happened. As I say this is important to note that the fact that this might not be a case of corruption in that there might not have been any gratification, does not necessarily mean that it is cleared from other potential breaches of law.

This brings me to the issue of fraud.  In simple terms, fraud is the unlawful and intentional making of a misrepresentation which causes actual prejudice or which is potentially prejudicial to another. It is when one misrepresents the truth in an unlawful way that results in loss or harm, or the potential thereof, to someone else.

So if someone generates an invoice that purports that they have done particular work whereas they have not, then that is fraud. If someone falsifies their qualifications, experience or compliance status in order to compete for a tender or get a job then that is fraud. If someone uses AI to produce a bank statement that is actually false so that they can qualify to get financing for a car then that is fraud. There are many examples in addition to this on what fraud is but the essence of it is the same - one misrepresents the truth in an unlawful way that results in loss or harm or the potential thereof to someone else.

Where fraud and corruption intersect is that very often those who commit corruption will use misrepresentation in order to conceal or hide the truth of what it is that they are actually doing. For instance, suppliers will present invoices that suggest that they used particular types and quality of material in rendering their services and will be paid for the value of those purported materials and services when, in fact, they have used inferior quality and cheaper materials. They would then share that inflated margin with the officials who would sign off on their invoices as though the right quality of materials was used. Because they would not want the payments to those officials to be easily traced they would rather give those officials bank cards that are in their own names but used by the officials for their own personal expenditure.

Conclusion

Allow me to wrap up.

As Ms Irene Naidoo and Prof Natasja Holtzhausen of the School of Public Management at the University of Pretoria posit, public value is about “the needs of citizens as well as ensuring that the goods and services they receive from government are of value to them as individuals and as a community. Beyond the needs of citizens, public value also has significant implications for public managers who have the responsibility of creating that public value, argues Moore (1995:28) and suggests, are tasked with the responsibility of creating public value.

The authors quote Marion Herder, who expands on the concept and the responsibilities on public value, arguing that there are three elements that define it: effectiveness, quality and legitimacy. Further, “public managers are tasked with developing systems and ensuring that the institution makes an impact. Furthermore, public managers must be accountable and engage with citizens, interested parties and elected representatives. Finally, while public officials have flexibility in executing their duties, they must do so in accordance with the law and constitutional and democratic principles.” (Herder 2017:5 p194).

I have sought to show you that while public value is indeed, on the face of it, about ensuring effective and efficient service delivery in the form of amenities such as water, electricity, healthcare and security services; it does not end there. How public administration succeeds or fails at delivering those services impacts a broader and more profound form of public value – the strength and legitimacy of our Constitutional democracy, a public value that was hard won through the blood, sweat, tears and lives of those who went before all of us.

I have also sought to give you a sense of how the performance, accountability, transparency and institutional integrity of public administration impact on public value in South Africa. I have shown you how whenever there is a breakdown between what public administration is doing and supposed to be doing vs what public value the citizens are deriving it is more often than not because of six reasons : Existence, Eligibility, Availability of resources, Economic procurement of resources, Efficient utilisation of resources, and Effective utilisation of resources.

Yet, I’ve also shown that those reasons are in many ways outcomes of a single fundamental reason – behaviour. How public officials behave, ultimately determines whether services will exist and be accessible and whether resources will be procured economically and used efficiently and effectively. I have shown you how corruption and fraud are two key types of behaviour that one often sees as driving the persistence of the undesirable trend of public value outcomes and most importantly, perhaps, I have shown you that before you rush to say that you will never do this or that you will never do that, it would be important for you – long before you are ever put into those positions of having to navigate ethical dilemmas – to be clear in your own heart and mind on what your basis for right and wrong is and how it is that you determine what right and wrong is. I have offered you one way of doing so and that is to ask yourself the simple question : if everyone else behaved in the way that I behave, would I be happy to live in such a world?

A few years ago we at the AGSA in grappling with the challenge of our mandate to strengthen constitutional democracy in the Republic; resolved that our work went beyond just reporting on debits and credits in the financial statements and had to be about seeking to make a stronger, more direct and consistent impact on the lived reality of ordinary South Africans by sustainably and efficiently shifting public sector culture through insight, influence and enforcement.

Influencing culture shift is not something that you would ordinarily see as the mission of any audit firms anywhere in the world but our landing on that as a strategic aspiration was informed by the very fact that we understood that if the pattern of deteriorating public services and a diminishing quality of life of the people of South Africa was to be turned around, the answer would need to sit in how public officials behaved and how public institutions engendered within themselves cultures of consistently doing what is good.

Most of you will end up joining the public service after your studies. It is commendable that you have chosen to be of service to your country and its people in that very special way of being a public official. Please remember, when you get there, that yours will be a responsibility to not just write documents, attend meetings and earn a salary; but rather to behave in ways in that are good, ways that improve the lived reality of ordinary South Africans, ways that role model to others that you will work with – what good looks like.

Do the right thing.

Thank you.