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PRESENTATION TO THE 3 rd PROVINCIAL PUBLIC SECTOR HUMAN RESOURCE MANAGEMENT CONVENTION EXTENT OF INDEBTEDNESS OF PUBLIC

PRESENTATION TO THE 3 rd PROVINCIAL PUBLIC SECTOR HUMAN RESOURCE MANAGEMENT CONVENTION EXTENT OF INDEBTEDNESS OF PUBLIC SERVANTS Presenter: MS ODETTE RAMSINGH DIRECTOR-GENERAL OFFICE OF THE PUBLIC SERVICE COMMISSION Date: 15 SEPTEMBER 2008. Presentation outline. Introduction

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PRESENTATION TO THE 3 rd PROVINCIAL PUBLIC SECTOR HUMAN RESOURCE MANAGEMENT CONVENTION EXTENT OF INDEBTEDNESS OF PUBLIC

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  1. PRESENTATION TO THE 3rd PROVINCIAL PUBLIC SECTOR HUMAN RESOURCE MANAGEMENT CONVENTION EXTENT OF INDEBTEDNESS OF PUBLIC SERVANTS Presenter: MS ODETTE RAMSINGH DIRECTOR-GENERAL OFFICE OF THE PUBLIC SERVICE COMMISSION Date: 15 SEPTEMBER 2008

  2. Presentation outline • Introduction • Methodology • Understanding the relevant terms • Statistical overview and analysis of the level of debt • Implications of indebtedness for the Public Service • Recommendations dealing with indebtedness • Conclusion 2

  3. Introduction • Since 2001, the Public Service has on an annual basis reported on financial misconduct in the Public Service. • Through this systematic tracking of financial misconduct the PSC became interested in the ability of public servants to manage their personal finances. • The ability to manage the State’s financial resources requires competency in financial management, an ability to manage finances effectively and efficiently, financial discipline and planning. • The aptitude for financial management begins with the ability to manage personal finances in a disciplined manner. • Any doubt on the ability of public servants to manage their own resources creates uncertainty on the level of trust, honesty and integrity with which they would manage departmental budgets and assets. 3

  4. Introduction • In 2007 the PSC deemed it appropriate to commission an investigation into the extent of indebtedness of public servants. • The objectives of the investigation were to – • investigate the extent of indebtedness of public servants • explore the implications for the Public Service • advise on the management of the issue • The investigation covered all National and Provincial departments within the Public Service and focused on information in respect of micro-lending transactions that took place and garnishee orders issued during the 2006/07 financial year. 4

  5. Methodology • Information was requested from PERSAL on the number of public servants who have been issued with garnishee orders and debit orders for payments to micro-lenders. • The requested information was provided to the PSC on the basis of anonymity, thus no names, PERSAL numbers and identity numbers, were revealed. This was done in view of the sensitivity of the private information on the finances of public servants. • For purposes of this investigation, data obtained from PERSAL was processed according to gender, age, department and component, amount paid to beneficiaries, post level and salary level. 5

  6. Understanding the relevant terms • Micro-lending is a financial term adopted by the micro-finance industry which refers to the practice of borrowing finance or a micro-loan from a micro-financier or a micro-lender. • The term over-indebtedness is used to describe debt which has become a major burden for the borrower. • In the event that a borrower fails to make payments or defaults in making repayments of a micro-loan, a micro-lender may approach the courts to apply for a garnishee or emolument attachment orderto ensure the full recovery of the debt. • A garnishee order or garnishment order is a court order or a civil judgment for the collection of debt. 6

  7. Statistical overview: Micro-lending • The total debt owed to micro-lenders by Public Servants amounted to R13, 3 million during the 2006/07 financial year • In total 4 063 public servants made payments to micro-lenders through PERSAL during 2006/2007. • It should be noted that information on the payments made to micro-lenders was only obtained in respect of the transactions recorded on PERSAL.  Payments can however also be made through stop order arrangements between the public servant and his/her bank as well as direct cash payments to the micro-lender.  • There could therefore be more persons who made payments to micro-lenders than the number provided by PERSAL. 7

  8. Statistical overview: Micro-lending • The highest number (1 381) is attributed to persons employed in the occupational category “Other occupations”. Instead of using the correct occupation, data capturers simply capture “Other occupations”. • The SAPS recorded the 2nd highest number (843), followed by the occupational category Cleaners (299) and the Nursing occupational category (226). 8

  9. Statistical overview: Micro-lending Number of employees R3.6 mil R1.9 mil R2.4 mil • The majority of the 4 063 public servants who made payments to micro-lenders were on salary level 7. • These public servants were also responsible for the highest amount paid (R3,6 million). 9

  10. Statistical overview: Micro-lending • The majority of public servants who made payments to micro-lenders falls within the age-group40 – 49, followed by those in the age-group 50 - 59. • These public servants also paid the highest amounts to micro-lenders, namely R6,6 million and R3,6 million, respectively. • Gender representation 10

  11. Statistical overview: Garnishee orders • The total cost of payments as a result of garnishee orders that were issued to public servants amounted to R1,01 billion during the 2006/2007 financial year. • There were 216 857 (20%) public servants who made garnishee related payments through PERSAL 11

  12. Statistical overview: Garnishee orders • Occupational categories with the highest number of garnishee related payments • The highest number of public servants (79 360) who made garnishee related payments is those in the occupational category “Other occupations”. • SAPS recorded the second highest number (27 653) whilst the lowest number included Prosecutors, Youth Workers and Social Work. 12

  13. Statistical overview: Garnishee orders • 25% of public servants who made garnishee related payments were on salary level 7. These public servants were also responsible for the largest amount of payments towards garnishee debt, namely R269 million. • The second highest number of payments were made by public servants at salary levels 6 (33 999), followed by those at salary level 8 (30 486). • A total of 444 SMS members made garnishee related payments, of who 24 are at salary levels 15 and 16. This does not auger well for leadership within the Public Service. • SMS members have express financial management responsibilities in terms of the PFMA and it is one of the obligatory CMC’s which they are evaluated against. If their personal finances are not in order it raises concerns about their ability to manage public finances. 13

  14. Statistical overview: Garnishee orders • Similar to the payments made to micro-lenders, it was found that the majority of public servants who made garnishee related payments (98 407), that is, 45% were within the age-group40 – 49. • These public servants were also responsible for the highest amount (R482 mil) of garneshee related costs, followed by the age group 30 – 39 (R280 mil) and those in the age group 50 – 59 (R206 mil). • The level of indebtedness of persons in the age group 50 – 59 is of concern given that such persons are approaching retirement and should be reaching a level of financial stability. • The percentage of male public servants who made garnishee related payments are 53% as compared to 45% female public servants. 14

  15. Implications for the Public Service • ADMINISTRATIVE BURDEN • The capturing of garnishee orders on PERSAL places an additional administrative burden on employers as it takes time to verify the information and to capture the data on PERSAL. • ETHICAL CONSIDERATIONS • A sound framework has been instituted to promote a strong culture of ethics within the Public Service. • The over-indebtedness of public servants could result in an erosion of ethics among public servants as they could be enticed to commit unethical or corrupt practices by accepting bribes and committing fraud as a remedy to their financial strife. • ILL HEALTH DUE TO FINANCIAL DISTRESS • Financial difficulties are among the known causes of stress and anxiety. • If a person already suffers from one or another type of illness, financial distress could worsen his/her condition. 15

  16. Implications for the Public Service • LOW PRODUCTIVITY • Health problems experienced by employees as a result of financial distress, is bound to have a negative impact on their level of productivity. • According to the findings of the PSC’s report on Sick Leave Trends, the level that is most prone to take sick leave are public servants at salary levels 1 – 8. These are the levels where most public servants who made both the highest number of micro-lending and garnishee related payments are employed. • IRREGULAR REMUNERATIVE WORK OUTISDE THE PUBLIC SERVICE (RWOPS) • Public servants who engage in RWOPS do so with a view to source additional income. While engagement in RWOPS cannot be attributed to one particular reason, the need to service debt or ease their level of indebtedness cannot be ruled out. • The fatigue and stress that is associated with holding two jobs at the same time is likely to impact negatively on an employee’s capacity to deliver. 16

  17. Recommendations • Departments should ensure that information is provided in line with the PERSAL data fields to avoid the creation of supplementary data fields such as “other” or “unknown”. • A fully fledged EAP should be embarked upon that would look into personal financial wellness with a key focus on legislative framework on micro-lending, procedure for the issuing of garnishee orders, credit rights, and budgeting, borrowing, saving and how to manage these effectively. • The implementation of the ethical framework should be strengthened. 17

  18. Recommendations • Departments are to keep abreast of the level of indebtedness of employees through the continuous monitoring of their records. • The policy framework around disclosure of financial interests should be amended to include such aspects as debt, the nature of the debt and the credit grantor(s) involved. • In deducting payments for a garnishee order the Accounting Officer should ensure that after deduction the official still has sufficient means for maintenance of him/herself and any dependents. 18

  19. Conclusion • Of great concern is that 20% of all public servants made garnishee related payments during the 2006/2007 financial year. • Given the large number of public servants that make micro-lending related garnishee payments, and given that there are other mechanisms in place to pay micro-lenders, it is highly possible that there are far more public servants who make use of micro-lenders than reflected in the report by the PSC on the indebtedness of public servants. • It appears as if public servants are struggling to cope with their personal financial planning. This raises questions about their ability to manage the State’s resources with which they are entrusted. • Based on the PSC’s assessment, the extent of indebtedness by public servants has negative consequences to both them as individuals and to the Public Service as employer. • These consequences can be mitigated if such public servants are provided with guidance on financial planning and management. 19

  20. THANK YOU!

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