By Staff Reporter
Public Accounts Portfolio Committee Chairperson Tendai Biti has told Parliament that the Accountant General in the Ministry of Finance Daniel Muchemwa was a lackadaisical man who did not know his functions.
Muchemwa, when he appeared before the Committee, failed to answer various questions and also confirmed that he did not do most of his duties which include preparing monthly, quarterly and yearly financial reports as well as issuing warranties to ministries since 2014.
Warranties are generally the authority given to Ministries to spend what would have been allocated to them from the national budget.
Below is the full text of what Honourable Tendai Biti said in Parliament:
Honourable Tendai Biti: Mr Speaker Sir, I move to wind up the debate and move for the adoption of the report. I want to thank Hon. Members who contributed on this very important report. I think today, we are also lucky that the esteemed Minister of Finance is also in the room, he would have heard the Members’ concerns and that report’s concerns as well as the Minister of Defence who is also very important. She will not just finish on the Ministry of Defence. Her ladder is very long. Mr Speaker Sir, this report raises five key issues which we hope the Minister of Finance will address.
The first one, as Hon. Members have been saying, Hon. Raidza, Hon. Nyokanhete and Hon. Wesley Sansole, the issue of the Accountant General – [HON. T. MLISWA: My issues also.] – I will come to your issues. The issue of the Accountant General, Mr Speaker, the Report founded the Accountant General as being a very lackadaisic gentleman. On one occasion, we had to suspend and adjourn our meeting because the Accountant General was unable to answer our questions. If a battle crane is unable to perform his duty, then he must be relieved of …
Mr Speaker Sir, we were disturbed that the Accountant General did not know his functions. As I have said before, in one of the meetings, we had to adjourn and postpone the meeting because the Accountant General was not very useful. The core mandate of the Accountant General and I need to overemphasise Mr. Speaker Sir, that the Ministry of Finance operates on three legs which are defined in the Public Finance Management Act. This is the Minister of Finance who is responsible or defined as Treasury. In terms of Section 7 of that Act, Treasury is responsible for formulating policy. The second office and a very important office is called the Pay Master General. The Pay Master General is the Secretary for Finance. He is responsible for making all payments consistent with the Blue Book. The third leg of the Ministry of Finance is called the Accountant-General. He is on par with the Minister, he is on par with the Pay Master General. The Accountant General looks after our accounts, looks after the books looks after the corporate governance of the Ministry. The core business of the Accountant General is to prepare books. The core business of the Accountant General is to prepare financial statements.
We were disturbed Mr. Speaker Sir, that contrary to his statutory duties, the Accountant General has failed to prepare monthly statements. He has failed to prepare quarterly statements. He has failed to prepare annual statements. We met him in January Mr. Speaker Sir, when we interviewed him and he assured us that by March of 2019, he would have prepared the reports of last year. We are now in almost the end of July Mr. Speaker, and he has not done so. The second omission was his failure to issue warrants in terms of the Public Finance Management Act. The way it acts is that when Parliament approves appropriations in terms of the Appropriation Act and approves payments which are detailed in the Blue Book, before a Ministry spends money, the Accountant General must issue a warrant under his hand or her hand to authorise a Ministry to spend money.
Since 2014, this Accountant General has not issued a warrant. That means that every cent that has been in every Ministry has been spent illegally without a warrant and that is dangerous Mr. Speaker Sir, because without a warrant there is no audit instrument. You cannot point out the Permanent Secretary of Defence or Health, that you over-spent when you never gave him a warrant to say, spend $20 thousand. The whole gamut, the whole ecosystem of good governance and corporate governance collapses when the Accountant General fails to issue a warrant. What disturbed us most Mr. Speaker Sir, was that the Accountant General did not know that he had an obligation to issue the warrant, which is why we recommended in our report that perhaps he could be retired, given a nice package and someone who is more knowledgeable of the provisions of the Public Finance Management Act be appointed.
The second issue that concerned us were budget deficits. The Government has been running budget deficits since 2014, starting with a modest budget deficit of $380 million in 2014 to $2.8 billion in 2018. Mr. Speaker, when Parliament sits to approve a Budget, we approve proposals that come from the Minister of Finance in disposing of its constitutional functions defined in Section 304/305 of the Constitution. It is Government itself which says we want to spend $2 billion or $4 billion. It is an abuse of this Parliament when Government then proceeds to spend money outside that approved Budget but that can happen. Mr. Speaker Sir, that is allowed in our law but when that happens, the Minister of Finance must come up with a bill of condonation to ask for forgiveness from this Hon. House for spending outside the limit that is given in the Appropriation Act, also known as the Budget. We are disturbed as a Committee that since 2014, the Government has been spending outside the Budget, running a budget deficit which at times has run up to more than 100% but has not come to this august House for condonation. There are two things that must happen Mr. Speaker Sir.
First, there must be a Bill of Condonation to say, I am the Minister of Finance, we have spent outside the budget. We are sorry to you Hon. Members, then there is a Supplementary Budget or a Supplementary Appropriation to authorise the expenditure that would have been done outside the Consolidated Revenue Fund and that has not happened. We point to 2017 as a very disturbing year because the approved budget for 2017 was $4 billion but the expenditure was $8 billion. So you spend over 200% of what was approved. So we recommend that the Minister of Finance must now do the right thing and come up with Bills of condonation and supplementary appropriations for 2014 to 2018. Deficit financing is not good for the country, which is why the new Minister of Finance is speaking of fiscal consolidation and balancing of books because that is key to public management.
The third issue is debt contraction and on debt contraction, there are three issues. The first one is the existence of multiple sources of debt contraction in the country. Everyone is contracting debt, in particular, the Reserve Bank. The parastatals are contracting debt. So we make the recommendations that there should only be one debt contracting office in this country, which is the Ministry of Finance, authorised by the President in terms of the Public Finance Management Act. The problem of multiple centres of debt contraction is that there will be no respect to the Public Debt Management Act. There will be no centralised recording of Public Debt and that is multiple contracting of debt in this country.
The second issue is the recording of figures. As Hon. Sibanda correctly pointed out that in the 2018 budget, there were three sets of documents produced by the Ministry of Finance on the same day. There was the Budget Statement itself the main statements read out by the Minister which claimed that our public debt, sovereign debt was US$17 billion consisting of a domestic debt of around US$11 billion and sovereign external debt of around US$7 billion.
We had two Blue Books and up to now Hon. Speaker, we have not obtained a satisfactory explanation from the Minister of Finance why two Blue Books were issued for the 2019 budget. One Blue Book had a debt of US$9.6 billion and another blue book had a debt of US$9.4 billion. In fact, one budget statement had three separate figures of public debt US$17 billion, US$9.6 and US$9.4 billion.
So, our recommendation is that the Public Debt Management Office must have a statutory mandate. In other words, the Public Debt Management Office should not be set as a department of the Ministry of Finance like Zimstart. It must have a semi-autonomous existence outside the Ministry of Finance so that there is legitimacy and credibility to our Public Debt figures. This office must also record all public guarantees issued by the State. In other words, anything that imposes direct or contingent liability on the State must be housed and quarantined in the Public Debt Management Office which should be located as a semi-autonomous office outside the Ministry of Finance and we gave the example in our report of the Zimstart which we set up in terms of the Statistics Act of Zimbabwe.
The reason why we did that was that we did not want inflation figures to be influenced by the Minister of Finance. Equally, we also do not want our debt figures to be influenced by the Executive, the Ministry of Finance and so that is our key recommendation. The third issue on debt and this is where I want to thank Hon. Mliswa who also happens to be my father in law and I want to thank him for the point he raised that Section 327 of the Constitution of Zimbabwe says any agreement contracted by the President or on behalf of the President which imposes fiscal obligations on the Republic of Zimbabwe must be approved by Parliament before it becomes alive. Before that agreement is consummated, it must be approved by Parliament but since 2014, we have been contracting public debt, particularly the huge debt that has been contracted by the African Import and Export Bank but Parliament has not been told.
So the report makes strong recommendations that the Minister must present to this august House all the debt that has been contracted and seek condonation in terms of Section 327 but in future, all public debt, all agreements that impose fiscals obligations on the State must be brought to this august House before they are signed inconsistent with the Constitution of Zimbabwe.
The fourth thing on public debt is non-compliance with the Public Debt Management Act. It puts a ceiling, a borrowing cap of 70% of GDP. We make the report and the observation in our report that although our GDP has been rebased, which retrospectively can make our figures look good, the fact of the matter is that when public debt was contracted in the years of 2014 to 2018 before rebasement, there was no compliance with the Public Debt Management Act in that the 70% cap was breached.
We were also concerned about non-compliance with Section 11 of the Public Debt Management Act. The Section says that before any public debt is contracted the Ministry of Finance must satisfy through a process of due diligence the following factors:
(a) is this debt in the public interest when we are borrowing;
(b) is this debt consistent with the macro-economic policies of the country;
(c) is the State able to repay its bebt?
In our analysis of the report, we found that there has been no compliance with Section 11 of the Public Debt Management Act. We found that there has been no due diligence that is envisaged by Section 11 and part of the problem is the fact that everyone is contracting debt, the Reserve etc, and not the Ministry of Finance. That is why we make the strong recommendation that there should only be one debt contracting office in the country. Here we are talking of external sovereign debt. If anyone wants money from China, Russia and Washington, he must go through the Ministry of Finance, because it is the one that can do the due diligence.
The fourth issue which we raised is the RBZ – there are two things that we raised in that report about the RBZ. The first one is the overdraft facility that the Ministry of Finance has been running with the Reserve Bank since 2014. Section 13 of the RBZ is very clear. The government cannot borrow more than 20% of its previous year’s revenue, but we found out that since 2015, the Central Bank has been exceeding when it borrows. It has been exceeding this 70%. The real fundamental issue that we raise in the report is why the Ministry of Finance, the fiscas borrows from a Reserve Bank and one that we know is actually broke and we are very pleased that the Minister of Finance in his 2019 budget said that will stop.
I hope it has not happened in 2019 and we do not know. That is the first issue that the Reserve Bank overdraft Section 13 must be revisited so that that cap is removed and the bank does not lend to Central Government. The second issue which we raised is the debt contraction by the Central Bank. The Central Bank is contracting debt. We are in the process of concluding a second report on the RBZ and its debt is over US$8 billion. So, it is imposing fiscal obligations to the Ministry of Finance but it does not have the same oversights that are in the Public Debt Management Act. Our submission in the report is that the Reserve Bank should stop contracting public debt. If it were to do so, it must be covered by the Public Debt Management Act and must do so through the Ministry of Finance.
In conclusion, we found that there is a culture of indifference, lackadaisicalness and of laxity in the management of accounts. As other Hon. Members have said, the Ministry of Finance had 57 qualifications, more than any other appropriation account, and that is not acceptable.
The Ministry of Finance is also an oversight Ministry, it looks after the health and hygiene and governance of all the other Ministries. So if the enforcer is limping then you cannot expect the other bodies to be okay, that is why we urge on the Minister of Finance to take our report very seriously and to ensure that the issues that we have raised are addressed very much. I, therefore, move that this House adopts the motion that:
This House adopts the motion on the Report of the Portfolio Committee on Public Accounts on compliance issues for the Ministry of Finance and Economic Development