Bean counter takes SITA reins
Treasury's former accountant general expected to tighten financial controls
The State IT Agency's 17th CEO since its inception in 1999 has been installed, and Sithembiso Nomvalo brings with him years of National Treasury and financial management-related experience, at a time when the agency is being probed by the Special Investigating Unit (SIU) for tender irregularities.
However, what is not yet clear is why SITA would need such specific skills at a time when it is meant to be wrapping up its three-year turnaround strategy, and former head Blake Mosley-Lefatola, who left suddenly eight months before his term was up, had claimed that the building blocks were in place.
In addition, Mosley-Lefatola's departure is still clouded in secrecy, with the agency saying only that, after a review of SITA's strategic direction, "the board and former CEO of SITA, Mosley-Lefatola, agreed to an amicable parting of ways to allow the CEO to pursue other interests outside SITA". Rumours are circulating that Mosley-Lefatola, who was thanked for his time, was ousted.
Mosley-Lefatola - who in 2011 became the agency's 16th chief executive - has told ITWeb his departure was not linked to his performance and that he did not initiate the move. Further details were not forthcoming, although the agency had promised to explain his departure when the new appointment was announced.
Nomvalo will fill the hot seat for only a year, and the agency is set to continue looking for a new head. However, this short-term appointment has been welcomed, with an analyst pointing out that it will allow SITA to focus on more immediate goals, instead of longer-term strategies being stopped and started every time a new head comes and goes.
Righting the ship
Yet, despite Mosley-Lefatola's statements that the turnaround strategy is making inroads and that there are visible improvements, such as tender processes becoming quicker, the agency still has holes that need to be plugged.
Recently, addressing the third annual Government IT Officers Council (GITOC) Summit, SITA chairman Jerry Vilakazi, who himself has not been in the position for long, said: "Our short-term strategy is to plug the holes, our medium-term strategy is to right the ship and our long-term strategy is to take SITA into Africa and bring revenue into our country through our contribution to the knowledge economy."
SITA would not clarify why there were holes when the three-year turnaround strategy is drawing to an end. Vilakazi noted that all challenges are now being "holistically" addressed by the new board.
"Right now our focus is [on] 'going back to the basics' and ensuring that the SITA is geared to undertake its mandate. We have a new board that is very well versed in the business world, bringing with it exceptional corporate governance experience and leadership. We are working to reduce the procurement backlog and ensure greater transparency in the procurement division."
SITA's new board was installed after its entire previous board stepped down last November, pending an investigation by the SIU, which is set to only wrap up in 2015. Every tender SITA has issued in the past nine years is under investigation by the SIU to determine whether any of its staff were involved in unlawful conduct, or wasted the entity's money.
Apart from Vilakazi, former Business Unity SA CEO, other appointments included advocate Beatrice Matlejoane as Vilakazi's alternate; businesswoman Anna Mokgokong, Zukile Nomvete and Khuseni Dlamini, while N Mngomezulu is National Treasury's representative.
SITA's statement, after Cabinet approved Nomvalo's appointment for a year, notes that the new head's appointment is "aimed at assisting in ensuring the finalisation of the implementation of the board turnaround intervention and in enhancing SITA's ability to fulfil its legislative mandate". Yet, Mosley-Lefatola has said, while work still needed to be done, the agency had made progress and the building blocks were in place. He said the agency had made progress in rooting out issues with its supply chain management system.
Mosley-Lefatola said there is still much to do to ensure SITA runs like a "well-oiled" machine, but the building blocks have been laid and it can now improve on those. He added there will be no reason to extend the three-year turnaround strategy as practices and procedures have been embedded.
SITA's turnaround strategy, which was set to come to an end mid-year, was premised on seven outcomes, which includes competitive pricing and financial sustainability, being a proficient IT agency, and providing effective, integrated supply chain management to government, notes Mosley-Lefatola.
During Mosley-Lefatola's time, SITA received only unqualified audits, meaning the organisation in all material aspects is "acting in accordance with all South African standards set". In addition, during his watch, during the SITA turnaround, there were no new scandals or tender irregularity investigations, he said. "Instead, we are continuing to clean up the matters that are legacy issues and date back to before 2010."
Industry, however, was not impressed with the progress, saying there was no visible external improvement, and tenders were still taking too long to be awarded.
Mogen Naidoo, the IDC's senior research analyst for software, security and enterprise solutions in sub-Saharan Africa, says Nomvalo's financial background and accountant general skills in areas such as internal auditing, cash management and risk management will help manage the impact caused by corruption and the "irregular procurement" practices.
In addition, his experience in developing turnaround strategies, influencing organisational change and providing advice to executives on financial management responsibilities prove positive for addressing the serious governance and procedural issues currently plagued within SITA, says Naidoo.
Naidoo adds that the new CEO's skills will also help with managing and optimising costs across the board, as set out in SITA's initial mandate. SITA was established in 1999 to consolidate and co-ordinate the state's information technology resources to achieve cost savings through scale, increased delivery capabilities and enhanced interoperability.
One of SITA's key mandates is managing IT costs, achieving economies of scale, providing a seamless procurement system and ensuring government has access to up-to-date and efficient technologies, says Naidoo. "The issue of managing costs continues to plague SITA and can be a consequence of issues in the other mandated areas," he adds.
Apart from a statement, SITA has not shed any light on why it needs Nomvalo's skills set. Instead, it told iWeek, in response to several questions, that "some of the issues are addressed in the content of the statement we sent last week concerning the appointment of the CEO. The CEO has been in office now for less than a week and he is still engaging with the organisation." iWeek was offered an interview with Nomvalo at a later stage.
Nomvalo, previously accountant general at the well-oiled National Treasury, has a background in influencing organisational change, which stands him in good stead with the current transformational agenda of SITA, says the agency.
"In his role as accountant general, he influenced the development and execution of turnaround strategies for government entities, such as the Department of Home Affairs, the then [Department of] Water Affairs, [and] a number of the Eastern Cape provincial departments." Nomvalo also provided strategic guidance and advice to executive authorities on their Public Financial Management responsibilities, especially on how to respond to various challenges facing their institutions.
During his stint at Treasury, Nomvalo also developed and implemented governance frameworks, as well as policies and guidelines in line with international and local best practice for the whole of government. He also introduced an e-learning tool on risk management for all of government.
SITA said Nomvalo "brings in extensive executive experience and an integrity that will help the transition to a permanent CEO working with the board". His one-year appointment is permanent and a break with previous three-year contracts.
Nomvalo's role at Treasury included accounting and reporting of internal audits of provincial departments, local government, public entities and constitutional institutions, says SITA. He was also responsible for the National Revenue Fund, as well as the reconstruction and development of the risk management strategy for the entire public sector.
Nomvalo served on several boards on behalf of Treasury, including the Accounting Standards Board, the Independent Regulatory Board for Auditors, the Electronic Communications Security Board, the Board of Trustees of the Government Employees Pension Fund and the Board of Trustees of the Political Office Bearers Pension Fund.
Before joining Treasury in March 2000, Nomvalo worked for Pretoria Portland Cement in various capacities. During his time there, he "provided strategic direction and leadership for the office of the accountant general, which resulted in the enhanced visibility and prominence of the office of the accountant general as a strategic partner in financial management and governance within the South African public sector".
"Nomvalo fully appreciates SITA's needs and requirements to move the organisation to become a lead agency for government, and the SITA board has full confidence in his ability to effectively lead the organisation to implement the organisation's new strategic direction", said Vilakazi.
Adds Vilakazi: "Nomvalo brings to SITA maturity, expertise and long-term leadership and managerial experience. His knowledge from a government perspective is underpinned by a strong leadership and governance background. We believe that, with his appointment, SITA is in good hands."
SITA, meant to be the state's IT procurement arm, has been under the whip, with the auditor general pointing to problems with its ability to stick to the Public Finance Management Act, and wide-scale problems with tenders.
The SIU probe, announced last September, was prompted by various earlier investigations, the Department of Public Service and Administration (DPSA), SITA's oversight department, has said.
One of the most in-depth probes into SITA's procurement practices was carried out in 2009, and resulted in a damning report by Henderson Solutions. The risk assessment report revealed large-scale irregularities within the organisation and its procurement practices, involving several of the agency's employees and other high-profile figures, including senior members of the South African Police Service.
Long-term mandates for an organisation like SITA are risky.
The 613-page risk assessment report reveals a seemingly total breakdown of the internal control environment, and left questions about how such widespread illegal practices could have escaped SITA management and its internal audit committee. Then public service and administration minister Richard Baloyi did not publicly release the report and was subsequently accused of burying the findings.
SITA's turnaround strategy was announced in the months following the release of the report. In 2010, the same year that the agency implemented a turnaround plan, the auditor general found that SITA did not have adequate policies, procedures and systems in place to ensure compliance with laws and regulations.
The SIU's probe was mandated to probe the agency through a proclamation by president Jacob Zuma in the Government Gazette. The Gazette states that the probe will examine unlawful or improper conduct by anyone who could have caused harm to SITA.
The investigation covers the period between October 2003 and September last year and will look into any "serious maladministration" in connection with SITA's affairs.
It will investigate whether there was "improper or unlawful conduct by members of the board, directors or employees" and "unlawful appropriation or expenditure of public money or property" as well as "unlawful, irregular or unapproved acquisitive act, transaction, measure or practice having a bearing on state property".
The terms of reference will also include a probe into "unlawful or improper conduct by any person". In addition, the schedule includes any failure to collect money due to SITA.
Although SITA received an unqualified audit opinion from the auditor general for the 2012 year, the latest for which a report is available, the auditor general found several instances of non-compliance with laws and regulations around the procurement process, contract management and adherence to internal control.
The AG also drew attention to the fact that, of the 58 planned targets, 63% were achieved during the year under review. Mosley-Lefatola has said that "all turnaround specialists will attest to the fact that embarking on a turnaround journey is probably one of the most difficult tasks that face any leadership team. The fact that the organisation performance is way above average at 63% is reasonable in the context of a turnaround."
The AG noted that SITA did not keep full and proper records, required by the PFMA, as, in some cases bid responses and master files for request for quotations awarded, could not be provided on his request.
Instances were identified where contracts were awarded to bidders who did not submit a declaration of past supply chain practices such as fraud, abuse of supply chain management systems and non-performance, as required by Treasury.
The AG also noted that sufficient appropriate audit evidence could not, in all instances, be obtained that contracts or quotations were awarded to bidders based on points awarded for criteria that were stipulated in the original invitation for bidding or quotations.
In addition, contrary to the law, a contract without an expiry date was awarded to a supplier, the AG found.
The AG also highlighted issues with leadership, including that ongoing monitoring and supervision to enable management to determine whether internal controls over financial reporting are present and functioning were not adequate, which led to material adjustments to the financial statements and non-compliance with laws and regulations.
Sufficient controls, to ensure compliance with procurement laws and regulations, have not been designed and implemented effectively, resulting in poor risk management, increased exposure to fraud and irregular expenditure, found the AG.
It also picked up internal control deficiencies and noted that SITA does not have a dedicated risk management department. Mosley-Lefatola noted that SITA was working on these areas in a bid to improve them.
Naidoo says it is key for the SITA board to prioritise the issue of cost management and/or the other mandated areas that need to be addressed in terms of how critical they are to the future of the organisation.
The CEO's mandate should be broken down into shorter terms, such as a year, with a view of the bigger picture, says Naidoo. "Long-term mandates for an organisation like SITA are risky. Given the historical pattern of CEOs, shortened mandates would ensure that the current and future CEOs would start and finish something that contributes to the ongoing improvements on the mandated areas."
In addition, a new head would not need to 'start over' each time a CEO leaves, says Naidoo.