History suggests that the most difficult reforms have occurred at the peak of protracted crises. So, the time for change is now
By Dr Vinaye Ancharaz
International Economic Consultant
Sunday’s festive mood was somewhat spoiled by the country waking up to the news that the price of gasoline (l’essence) has gone up by Rs 4.40 per litre, with the price of diesel maintained at Rs 35 per litre. The Petroleum Pricing Committee pinned this increase to a sharp rise in the world price of oil and the continued strengthening of the US dollar. However, as usual, the devil is in the detail. The new price of Rs 48.40/litre includes taxes and compulsory contributions amounting to Rs26.10, that is 56% of the wholesale price of gasoline! And the fact that the price of gasoline was increased while that of diesel remains put corresponds to an implicit subsidy paid by users of motor vehicles to users of public transportation, as if the former are rich, and the latter poor!
“Indeed, access to records was one of the biggest constraints that the NAO staff faced in carrying out the 2019-20 audit. For the Safe City Project, for example, the Police Service invoked a confidentiality clause in the contract with Mauritius Telecom to deny access to vital information. At the Ministry of Environment, documents in respect of 13 contracts of a total value of Rs574.2 million were not produced to the auditors…”
The outcome could have been different. Last year when oil prices collapsed on the back of the outbreak of Covid-19, local prices were maintained, resulting in significant gains in the reserves of the Price Stabilization Account, part of which was used to support government efforts to combat the pandemic. At a time when large segments of the population are reeling from the devastating economic effects of the pandemic while facing sharp hikes in food prices, the higher price of fuel only makes things incrementally worse. It represents a desperate measure to replenish the government coffers that have been systematically plundered through a lot of wheeling and dealing, bordering on corruption and an outright theft of public money. This is what the people have suspected for some time. It is now confirmed by the latest report of the National Audit Office (NAO).
The 2019-2020 Audit Report continues in the steps of its predecessors, making important revelations about wastages of public resources due to a lack of adherence to legislations and basic principles of procurement, governance, and asset management. Where the Report departs from the tradition is in the very scale of the dilapidation of taxpayers’ money that it brings to light. To be fair, much of the period (July 2019 to June 2020) that the Report covers is exceptional, and it would therefore be meaningless to compare it against past years. Yet, the audit period spans less than three months of the Covid-19 crisis, which started with the first lockdown in March 2020. This is why the Report’s findings are so significant. If in such a short period, so much of public finances was misappropriated, wasted or lost, one can only speculate about the horror story that next year’s Report will tell, more so since it will cover another lockdown period and a gush of Covid-19-related government spending.
The 500-page Report devotes an entire thematic chapter to Covid-19-related expenditure and, not surprisingly, this is where the most critical findings lie. However, the Report also reveals irregularities and wastages in several other sectors that have nothing to do with the pandemic. For example, it notes that the Safe City Project was awarded to a private company without any assessment as to whether that company offered the best deal. This is a major misstep since the sheer size of the project (Rs16 billion) meant that a shade less could have resulted in substantial savings. Similarly, delays in awarding contracts led to significant loss of money.
A case in point is the contract for security services for 292 schools, which had been approved in February 2017 but not yet awarded, leading to the renewal of contract with the existing service providers on a month-to-month basis, at much higher cost. One would be tempted to ask if this situation is not deliberate so as to favour the current contractor!
The Report also draws attention to deficiencies in managing and enforcing contracts, which have resulted in recurring project delays and loss of money in several ministries/departments. At the Ministry of Education, for example, delays up to 575 days have been registered in respect of projects for the maintenance of buildings.
In several other projects, value for money was not obtained, and the contracted services were not delivered despite substantial additional cost incurred. The most glaring example, perhaps, is a project to design and implement a Human Resource Management Information System at the Ministry of Public Service. Seven years after the contract was awarded, not a single module of the project has been operationalized, and the government has now decided to scrap the project after spending Rs 422 million on it!
Another damning case is the project to provide high-speed connectivity in 164 secondary schools, awarded to a local company in December 2015. The company went into receivership in January 2019, by which time no school had been connected to the Internet. Payments to the tune of Rs 83.6 million (or about 70% of the project value) made to the contractor as at 30 June 2020 have been lost. These cases prompt one to wonder if some contractors benefit from a culture of impunity due to their affinity with people close to or in the circle of power.
Last, but not least, the Report also uncovers numerous shortcomings in asset management, resulting in loss of assets, or waste of public funds. The Ministry of Ocean Economy, for example, acquired 20 patrol boats at the cost of Rs 59 million over the four years to June 2020. However, due to lack of repair and maintenance, only eight of these boats are currently operational, hampering the good conduct of control and surveillance activities. It is worth pointing out here that the government realised a measly return of 1.5% on its investments in 2019-20!
It was hoped that the Audit Report would bring new evidence on the dubious cases of award of contract under Emergency Procurement (EP) rules for the provision of equipment and medical supplies in relation to Covid-19. Unfortunately, the audit investigations were obstructed by the refusal by the Ministry of Health to provide access to critical files on the excuse that these had been secured by ICAC. Elsewhere, NAO auditors could find no documentary evidence in respect of Rs 1.7 billion spent on purchases of medical products and for a payment of Rs 72.3 million by the Ministry of Commerce.
Indeed, access to records was one of the biggest constraints that the NAO staff faced in carrying out the 2019-20 audit. For the Safe City Project, for example, the Police Service invoked a confidentiality clause in the contract with Mauritius Telecom to deny access to vital information. At the Ministry of Environment, documents in respect of 13 contracts of a total value of Rs 574.2 million were not produced to the auditors. On the whole, as at 31 January 2021, only 40% of ministries and departments had submitted their Annual Report on Performance for the financial years 2019-20 and 2018-19.
Nevertheless, the available information, albeit partial and incomplete, provides a particularly damning account of the conditions under which Rs 14 billion worth of medical products were procured. It transpires that some Rs 1 billion was disbursed by the STC for the purchase of medical products and subsequently claimed from the Ministry of Health even if it was the Ministry of Commerce which commissioned the transaction – in many cases, independently, and without knowledge, of the Ministry of Health. Indeed, the Ministry of Health had diluted “its accountability for and ownership of [Rs 1.7 billion worth of] medical products purchased during the Covid-19 period.” This resulted in various irregularities, such as Rs 94 million paid for defective ventilators and Rs 853.7 million paid for medical disposables to companies with no previous dealings with the government. These supplies came at exorbitant prices – up to 67 times higher than the last price paid by the Ministry of Health – and, as of October 2020, delivery of 37 drugs ordered under EP was still under way.
It is beyond the scope of this short article to highlight all the cases where fundamental principles of good governance were flouted, resulting in the loss or waste of public funds. The Audit Report is particularly critical of the Ministry of Commerce and the Ministry of Health for abdicating their responsibilities to ensure rule-based procurement, and thus to safeguard the interest of Government.
While the NAO appreciates the difficult situation engendered by the pandemic, it blames the Ministry of Health for not preparing and deploying an effective contingency plan. This lack of preparedness seems to cut across all spheres of government and, coupled with the characteristic lack of competence in various sectors and the capture of decision-making by pseudo-intellectual advisors, the government’s machinery is screeching painfully to meet the people’s expectations.
The Audit Report makes a number of recommendations to address shortcomings in the management of procurement, contracts and assets, to ensure compliance with legislations and to guarantee value for money. This is not new; however, given the unprecedented scale of inefficiency and gaping waste highlighted by the Report, the recommendations are more than ever urgent.
Independently of the Report, the Ministry of Finance has asked all ministries to target a 25% cut in their recurrent budgets in view of the upcoming Budget exercise. Perhaps this measure – if only it had the power of a directive – could signal the instauration of a value-for-money culture in Government, which up till now has remained elusive.
History suggests that the most difficult reforms have occurred at the peak of protracted crises. So, the time for change is now. Conversely, the kind of systematic looting that the Report highlighted suggests a Mafia-style plan orchestrated at some higher helm, in many cases allegedly by some people we had elected to serve us. Will this change?
* Published in print edition on 6 April 2021