ANC Today

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Volume 5, No. 38, 23-29 September 2005
 
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THIS WEEK:

* Letter from the President: Happy birthday SAICA! 
* Transformation: Sustaining the civilising mission of revolutionary democracy 

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LETTER FROM THE PRESIDENT

Happy birthday SAICA!

On Wednesday September 21, I joined members of the South African Institute of
Chartered Accountants (SAICA) at a dinner organised to celebrate the 25th
Anniversary of the Institute. In my comments at the dinner, I had occasion to
remind the celebrants of the importance of their profession. To this end I cited
observations made by the Nobel Prize-winning economist, Joseph Stiglitz. In his
book “The Roaring Nineties”, he said:

“Corporate financial reports are tremendously complicated. That’s why
accountants get hired. They are supposed to present profits and losses, and net
worth and so on, in standardised ways that can be widely understood. Some argue
that capitalism – and the modern corporation – could not have arisen without a
reliable accounting industry able to provide a reasonably accurate picture of a
firm’s net worth and profits. 

“Without that information, how can anyone assess the value of a firm? Equities
are supposed to give the stockholder a share of a firm’s profits; but if the
firm could simply make up any old number, who would buy a share?

“Accountants are required in part because shareholders know that they can’t
trust firms – there is simply too strong an incentive, even in the presence of
fraud laws, to provide misleading information...”

To this we must add that accountants are also required because the people also
need to know how the governments they elect utilise and manage the funds
collected through taxes and levies. We must therefore say that good governance
needs good accountants.

In his speech at the dinner, the Executive President of SAICA, Ignatius Sehoole,
made at least two important points. One of these was that our country needs more
accountants, and must therefore do everything possible to close this skills gap.
In a 2005 article entitled “Premium on black accountants”, Sherilee Bridge-David
said South Africa has 23 493 chartered accountants (CAs). 

Correctly, SAICA President Sehoole wants this number increased. In this context,
we must take into account the fact that because of the quality of our training
programmes, the South African-trained CAs are in great demand everywhere in the
world. 

Our training targets must therefore also factor in the phenomenon of “brain
drain”, caused by the attraction of higher earnings in the countries of the
North. We must also take into account the fact that a significant number of CAs
drift out of the profession by taking up such occupations as company CEOs and
Chief Financial Officers.

President Sehoole also emphasised the urgent need to increase the number of
black accountants. In the article to which we have referred, Sherilee Bridge-
David said, “There are 23 493 CAs in South Africa, of whom 543 are black African
and only 178 of these are black women. That means one out of 43 CAs is black –
suggesting that transformation of the accounting profession has lagged the
progress made by sectors such as the financial services industry – not that it
is not trying.”

Indeed a serious effort is being made to address this challenge. For instance,
SAICA, together with the Association for the Advancement of Black Accountants of
Southern Africa (ABASA) and the Public Accountants and Auditors Board (PAAB), is
running the skills development Thuthuka Project, which includes the Thuthuka
Bursary Fund. For its part, ABASA has launched the Nkuhlu Subvention Fund, whose
focus is to increase the standard of accountancy in those institutions that
attract mainly black students but have a low level of private sector funding.
Both these important projects need maximum support.

In his comments, Joseph Stiglitz also said that, “While accountants have long
been the butt of jokes...they have a difficult and important task. Their
responsibility goes beyond the mechanical application of rules.” This is so
because, in part and in principle, accountants should be among the frontline
forces engaged in struggle against corruption in both the public and private
sectors.

Our movement, government and people are deeply concerned about the incidence of
corruption in our country. This concern arises from the fact that corruption in
the public sector means theft of resources that belong to the people. In the
private sector, it deprives the economy of resources that would be used to
increase the national wealth, and thus create the means to meet the needs of the
people.

Corruption in the public and private sectors therefore directly undermines the
critically important national effort to defeat poverty and underdevelopment, and
thus ensure sustained progress towards the achievement of the goal of a better
life for all.

Our country and people therefore count on the auditors and accountants, who are
trained to analyse financial accounts and records, and are thus able to
determine whether the money flows point to wrongdoing of one kind or another.

This assumes that these auditors and accountants are people of integrity who
will, at all times, respect the ethical imperatives that are fundamental to, and
should characterise their profession. It also assumes that these honest
professionals would be inspired by a level of courage and commitment to the
public good that would oblige them to report any corruption they may unearth, to
enable our law enforcement authorities to take the necessary action to punish
the corrupt.

However, the spectacular collapse of major companies particularly in the United
States, such as WorldCom and Enron, has raised serious doubts about the
commitment of many accountants to the ethical standards that all of us expect of
these professionals. 

This is because it has now been confirmed that some of the accountants who
audited the accounts of these firms helped to falsify the financial affairs of
these companies, and thus legitimised the massive corporate corruption that
ultimately led to the collapse of these large corporations.

Earlier, here at home, Justice Nel, tasked to lead a Commission of Inquiry to
investigate the collapse of the Masterbond companies, had drawn attention to the
corrupt practices of some South African accountants. As we said in the National
Assembly recently, outraged, Justice Nel said his investigation had:

“Revealed an astonishing degree of dishonesty, inefficiency, lack of
professional integrity and lack of independence on the part of some of the
auditors involved with these (Masterbond) companies.” He said he “Found it
difficult to believe that some of the auditors concerned with the Masterbond
companies could have been so inefficient or blatantly dishonest as was gradually
revealed by the forensic investigation. 

”The saga of dishonest or inefficient auditors which would further emerge during
the course of the investigations conducted by the Commission, belied the
generally perceived honesty, integrity, efficiency and independence of auditors.


“It became apparent that with a few notable exceptions, the auditors involved
seemed to believe that in addition to auditing the books of a company, their
function was to assist and protect the management of such company as far as
possible. They also seemed to believe that the end justifies the means.”

In an article entitled “Accounting for the accountants”, Andrew Simms, director
of the New Economics Foundation said: 

“Multinational corporations, nearly all clients of the big four (global
accounting firms), have been heavily criticised in recent years for the
unaccountable power, privilege and super-profits they enjoy in the global
economy. Very little attention, however, has gone to the powers behind the
throne. Finally they are being pushed slowly and tortuously into the public
spotlight. Virtually every aspect of corporate operations (is) either directed,
influenced or excused by the tiny number of very large ‘professional services’
firms – or what we used to call accountants…

“(The) privileged access to information (of the four global accounting firms)
also makes them morally responsible when damaging information about a
corporation that is in the public interest is withheld. The consequences of poor
auditing or the failure to ring loud enough alarm bells when corporations behave
improperly is not just a social and environmental issue. In the case of major
bank failures it has brought global financial systems to the edge of collapse
and ruined countless lives. 

“The rise to power of the four brothers has happened without any similar growth
in their accountability. The charge sheet is long. Aiding tax avoidance
highlights their role in the questionable future of government’s ability to
raise tax to pay for public services. Then there is the further concentration of
corporate power, corporate spin, the questions about bribery and corruption,
allegations of money-laundering, influencing legislation, conflicts of business
interests, disclosing information in the public interest, and the social and
environmental performance of companies.” 

Undoubtedly it would be grossly unjust and unacceptable to accuse or suspect all
or even the majority of the members of SAICA and ABASA of the unethical
practices that Justice Nel and Andrew Simms spoke about. However, our
accountants will have to accept that the question will be asked everyday,
whether our accountants are acting to facilitate corrupt practice or are engaged
in the critically important struggle to defeat corruption!

This is because it is now patently clear that a significant number of our people
seem to have come to the conclusion that the liberty we achieved in 1994 at
great cost in human lives, affords them the freedom to engage in corrupt
practice, illegally to enrich themselves by stealing from the public and from
corporate shareholders.

Particularly disturbing in this regard is the phenomenon that is manifesting
itself within our movement, of some people abusing membership of the
organisations of the people, including the ANC, as a stepladder to positions of
power, power they would then use corruptly to accumulate riches for themselves,
rather than serve the people of South Africa.

In addition, all of us must accept that corruption is a global cancer.
Corruption in our country is driven by the same imperatives that drive
corruption in all other countries. We are therefore confronted by a systemic
social problem rather than unique and exceptional criminal behaviour by some
South Africans.

For instance, Iraq is going through an immensely difficult transitional period
to unity, peace and democracy, which unfortunately everyday claims the lives of
innocent people. One would assume that in this situation, those responsible for
leading Iraq through its transition would ensure that every available dollar is
used to build the new Iraq.

And yet, according to the British newspaper “The Guardian”, Ed Harriman has
reported that: “The auditors have so far referred more than a hundred contracts,
involving billions of dollars paid to American personnel and corporations, for
investigation and possible criminal prosecution. They have also discovered that
$8.8bn that passed through the new Iraqi government ministries in Baghdad while
(US Administrator) Bremer was in charge is unaccounted for, with little prospect
of finding out where it has gone. A further $3.4bn appropriated by Congress for
Iraqi development has since been siphoned off to finance ‘security’.”

On the recent occasion when we answered Members’ Questions at the National
Assembly, and referred to the observations made by Justice Nel, we also drew the
attention of our Members of Parliament to the analysis made by the financier,
George Soros, relating to the sources of corruption in contemporary human
society.

Among other things, George Soros said: “One of the great defects of the global
capitalist system is that it has allowed the market mechanism and the profit
motive to penetrate into fields of activity where they do not properly belong.
The promotion of self-interest to a moral principle has corrupted politics and
the failure of politics has become the strongest argument in favour of giving
markets an even freer reign... 

“Unsure of what they stand for, people increasingly rely on money as a criterion
of value. What is more expensive is considered better. The value of a work of
art can be judged by prices it fetches. People deserve respect and admiration
because they are rich. What used to be a medium of exchange has usurped the
place of fundamental values, reversing the relationship postulated in economic
theory. What used to be professions have turned into businesses. The cult of
success has replaced the belief in principles. Society has lost its anchor.” 

All of us know that we are afflicted by the phenomenon of people who, while
pretending to be comrades, are individuals driven by the same psychology and
value system described by George Soros. These are our compatriots who have
elevated self-interest to a moral principle, relying on money as a criterion of
value.

As we fight the pervasive cancer of corruption, which is representative of a
society that has lost its anchor, we will continue to rely on our accountants to
help our country and people to sustain the permanent struggle against
corruption. During its next 25 years, SAICA will not and cannot avoid working to
ensure that its members help our country to respect Nelson Mandela’s call for
“the RDP of the soul.” Happy birthday SAICA!

Thabo Mbeki

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TRANSFORMATION <Viewpoint: Joel Netshitenzhe>

Sustaining the civilising mission of revolutionary democracy

Centuries ago, great kingdoms adorned the hills and plains of the Vhembe valley,
representing a unique civilisation of socio-political organisation, production
and trade. Their prowess and ingenuity are only now starting to be afforded the
recognition they deserve. But much of their essence remains a mystery still to
be fully explored. What we do know though is that Mapungubwe, Thulamela and
Dzata perished and with them a unique body of knowledge lay in ruins. 

To the extent that we know not fully how they rose and fell, to that extent we
are justified in being possessed with doubt about whether the civilising mission
of national democracy will endure. 

Here we are today in a journey that has drawn from the best in human
civilisation – liberty, non-racialism, non-sexism and pursuit of shared economic
growth – and we still wonder: what is it that the masters of the foundries and
other artisans, the priests, the prophets and prophetesses, the generals, the
poets and the musicians crafted that made these civilisations so great! 

We still have to find answers to the question: what is the complex of riddles
that the citizens of these kingdoms failed to unravel that led to their ruin!

I pose these questions to assert a simple truth: that any civilisation contains
within itself the possibility of its own sustenance and advancement, as it does
the seeds of its own destruction. At the core of that destiny is the task of
forging intellectual capital – with the correct tools of understanding social
reality, the ingenuity that goes with seriousness of application, the
irreverence that lays bare the truth in its splendid and repulsive self, and the
intellectual focus that breeds a confident humility.

Where is the system of knowledge-management that joins the revolutionary
intellectuals of modern-day South Africa to raise the trajectory of civilisation
to new heights? In what ways are today’s artisans, priests, prophets and
prophetesses, generals, poets and musicians path-finders in a journey of
creation? 

This then is the challenge to the emergent middle and upper strata of a changing
South Africa – to the intellectuals, the manufacturers and the traders – today
multiplied in number by the attainment of freedom!

We may be justified in lamenting the pace of their propagation in the social
structure of the nation. But we do know that while black ownership of ‘public
companies’ was only 3,9% in 1997 it had grown to 9,4% in 2002. While there were
only 14 black directors of these companies in 1992, by 2002 the number stood at
438. 

The rate of their expansion may be too slow for comfort; and it should concern
us that the number of black professionals and middle managers grew by a measly
three percent between 1996 and 2001. But this is a debate for another day. The
point at issue is one about quality rather than just quantity. 

Are these artisans, manufacturers, traders, priests, prophets and prophetesses,
generals, poets and musicians committed actively to change social relations in
line with the civilising mission of revolutionary democracy; or are they getting
transformed by the very system that they seek to change! Are they the brains
trust of a new social order or have they succumbed to the intellectual indolence
that comes with glorification of material benefits!

I dare assert, in the conjecture that attaches the riddles of Mapungubwe,
Thulamela and Dzata, that an intelligentsia that hypnotises itself gazing at its
navels breeds inertia and stagnation in a civilisation, and commits the crime of
precipitating its steady but certain decline.

And so in today’s South Africa, we slowly acquire the instruments to reshape
production and trade; and yet confine our intellectual horizons to maintaining
the configuration of a capitalism inherited from the robber-baron culture of the
erstwhile colonial masters. 

We stand at the pinnacle of political power but draw pride merely at managing
macroeconomic realities in a manner that seeks to perpetuate rather than improve
what we inherited. We evince the syndrome of models on a catwalk – satisfied
with ourselves only when the supposed connoisseurs applaud. 

How do we otherwise explain our inability to shape a manufacturing sector that
takes advantage of the profound shifts in class structure brought about by
freedom and people-centred development, let alone cutting edge technology that
combines advanced manufacturing and objectives of sustainable development? 

Facts tell us the tale of the buying power of black communities growing apace, a
consequence of improving living standards that derives from the attainment of
democracy. And yet we adopt an attitude that laments growth driven by consumer
demand, and fail to see the systemic shift in social structure that will endure
for many years to come. 

For instance: at best we fail appropriately to expand capacity to manufacture
large quantities of white goods for the lower middle strata, electronics and
furniture in line with growing aggregate demand; and at worst we continue to run
down such capacity. At best we accord unproductive shareholding the rank of
ultimate status symbol; and at worst we scoff at productive activity even when
new mega-projects cry out for a variety of inputs such as cement and other
supplies, as well as project management, engineering, artisanship and other
skills. 

I dare surmise, drawing on the cursory knowledge of the dynamics of Mapungubwe,
Thulamela and Dzata, that sustaining and advancing a civilisation depends on
propensity to assert the intellectual authority of that civilisation, and at the
same time having the courage to question its internal logic. Pride and
satisfaction among intellectuals are of value only if they contain within
themselves the sense of self-doubt that impels a search for new and improved
ways of doing things. 

Indeed, the emergent middle and upper strata of a democratic South Africa are
challenged to lift themselves above what they have inherited, in lifestyle and
frame of reference. 

Having invaded the living spaces where, under apartheid, black angels feared to
tread, we tend to adopt the culture of conspicuous consumption, such that
keeping up with the Mukwevho's takes precedence over a steady progression on the
social ladder. As such, drawn to living above our means, we fall prey to the
temptation to accumulate prized possessions, by fair means or foul. 

This is not a plea to resurrect a mystical African vhuthu (ubuntu) which would
otherwise represent glorification of conduct that belongs to an outmoded social
system. But we have to tackle the battle of frames of reference in which social
conduct is informed by the avarice and self-centredness of sections of European
and North American societies. 

Should we allow, like the intellectuals of Mapungubwe, Thulamela and Dzata, a
situation to develop such that the children of our children are only able to
wonder at what impelled the generations before them to do what they did? Where
is the African writer who has put down on paper the experiences of Robben Island
or Barberton Prison or Soweto or Gugulethu or Congoa in Tanzania or Katenge and
Kashito in Angola! Where is the African producer who has put together a film
that lays bare the rationale, the emotions and the contradictions of
revolutionary struggle!

Instead, we still debate, without shame, whether the nation’s flag should adorn
public school-yards and receive due recognition by pupils and teachers alike! We
resort to sophistry, to explain a history curriculum that, we are told, is meant
to encourage debate; but which in actual practice avoids value judgements on
this civilising mission of revolutionary democracy! And we encourage children to
devalue artisanship and fear entrepreneurship, believing that qualifications of
status are those that render us employable by others!

In other words, we have to ask ourselves whether we have gone far enough in
avoiding the pitfalls that may have beset the civilisations of Mapungubwe,
Thulamela and Dzata! 

If the artisans, the priests, the prophets and prophetesses, the generals, the
poets and the musicians of the current age do not assert the values of the
civilising mission of the new South Africa, they shall, as possibly happened in
African civilisations of yore, be consumed by petty jealousies that lead
individuals in positions of power to subvert a whole social edifice; the ethnic
and sub-ethnic chauvinism that pits citizen against citizen; and the indolence
of mind that befalls an intelligentsia possessed by the comforts of political
and economic power. And, steadily but surely, the national democratic project
will lose its way.

This then is the challenge for today’s graduates, an appeal to the
intelligentsia of a changing South Africa: you must let those who sit in the
hallowed chambers of political and economic power, as well as the media and
other institutions of ideology, hear your voices asking difficult questions. 

Let your irreverence fill them with uncertainty enough to set their minds to
creative work, save their brains from intellectual atrophy. Thus, future
generations will not marvel at the ruins of a civilisation that failed to
sustain itself; but enjoy the beauty of a revolution that continually redeems
its tryst with destiny.

** Joel Netshitenzhe is an ANC National Executive Committee member. This is an
edited version of a speech delivered at the University of Venda Graduation
Ceremony, 17 September 2005.

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