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

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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
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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

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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 States 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.

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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.

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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.

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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 order to 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.

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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.

National Provincial
R 3.3 m (25) R10 m (75)
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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).

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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).

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Statistical overview Micro-lending

• The majority of public servants who made payments
  to micro-lenders falls within the age-group 40
  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

Payments made to micro-lenders Payments made to micro-lenders Payments made to micro-lenders No of public servants No of public servants
Gender Number Amount Number
Male 1 894 47 R6.4 mil 474 795 43
Female 2 169 53 R6.9 mil 623 263 57
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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

National Provincial
R235 million (23) R776 million (77)
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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.

Occupation category No of public servants
Other occupations 79 360
Police 27 343
Other administrative 12 599
Trade labourers 4 686
Staff nurses 3 828
Mess porters delivery 2 619
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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 CMCs which they are
  evaluated against. If their personal finances
  are not in order it raises concerns about their
  ability to manage public finances.

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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-group 40 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.

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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.

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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 PSCs 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 employees capacity to
  deliver.

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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.

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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.

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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 States resources with which they are
  entrusted.
• Based on the PSCs 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.

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THANK YOU!