Dismissals and Resignations Reporting Template - 31 May 2023

National Treasury Circular 2023, issued on 30 May 2023, mandates accounting authorities of public entities listed under Schedules 2 and 3 of the Public Finance Management Act (PFMA) to report on employees dismissed or those who resigned prior to the finalisation of investigations or disciplinary processes. This directive, a direct response to the Judicial Commission of Inquiry into Allegations of State Capture, Corruption and Fraud (Zondo Commission), aims to establish a centralised register to enhance accountability, improve vetting processes, and implement preventative measures against corruption and mismanagement within the public sector. The circular outlines a phased implementation, with an initial focus on collecting historical data from the 2018/2019 to 2022/2023 financial years, requiring urgent compliance from affected entities.

The South African public sector is undergoing a significant shift towards enhanced accountability and transparency, driven by the imperative to combat corruption and mismanagement. A pivotal development in this regard is the National Treasury Circular 2023, issued on 30 May 2023, which introduces a mandatory reporting framework for dismissals and resignations within public entities. This circular, titled "Central Register on Dismissals and Resignations of Employees," requires accounting authorities of entities listed in Schedules 2 and 3 of the Public Finance Management Act, 1999 (Act No. 1 of 1999) (PFMA) to submit detailed information on employees who have been dismissed or who resigned to avoid disciplinary action or the finalisation of investigations.

This directive is a direct consequence of the recommendations made by the Judicial Commission of Inquiry into Allegations of State Capture, Corruption and Fraud, commonly known as the Zondo Commission. The Commission highlighted a critical vulnerability in public administration: the absence of a centralised register that tracks individuals who leave public service to evade accountability, often enabling them to secure employment in other state organs. The National Treasury's circular seeks to close this loophole, fostering a more robust system of governance and integrity across national and provincial government institutions and State-Owned Enterprises (SOEs). For legal practitioners advising public entities or engaging with public sector employment matters, understanding and ensuring compliance with this new reporting obligation is paramount.

The Public Finance Management Act (PFMA) serves as the cornerstone of financial governance in South Africa's public sector. Enacted in 1999, its primary objectives are to secure transparency, accountability, and sound management of revenue, expenditure, assets, and liabilities across national and provincial government institutions. The PFMA mandates strict compliance with financial management practices, with non-compliance often leading to financial misconduct and disciplinary action. Treasury Regulations, issued under the PFMA, further elaborate on these requirements, including annual reporting on the outcomes of disciplinary hearings and criminal charges.

However, the Zondo Commission's findings exposed a significant gap in the existing framework. While the Department of Public Service and Administration (DPSA) and the Department of Cooperative Governance (DCoG) maintain some records of disciplinary actions, there was no comprehensive, centralised register covering all spheres of government and SOEs. This fragmentation allowed employees facing serious allegations of misconduct or corruption to resign before disciplinary processes concluded, thereby avoiding formal findings and subsequently gaining employment elsewhere in the public sector without their past conduct being flagged. President Cyril Ramaphosa's response to the Commission's recommendations specifically directed departments to collaborate on designing and implementing solutions to address this challenge, directly leading to the issuance of this National Treasury Circular.

The National Treasury Circular 2023 represents a critical step towards operationalising the Zondo Commission's recommendations and strengthening the integrity of public service. The circular explicitly requests information from accounting authorities of public entities listed in Schedules 2 and 3 to the PFMA, focusing on employees dismissed or those who resigned prior to the finalisation of investigations or disciplinary processes. This targeted approach aims to capture data that was previously elusive, providing a clearer picture of individuals who may have circumvented accountability mechanisms. The establishment of a central register is intended to bolster the administrative capacity for vetting new and existing employees, thereby enabling more effective detective and preventative mechanisms against corruption.

The implementation is structured in two phases. Phase one, which had a submission deadline of 15 June 2023, required the collection of baseline information dating back five financial years (from 2018/2019 to 2022/2023) concerning dismissals and resignations under the specified circumstances. Phase two will focus on the ongoing, regular collection of this information, with further details to be communicated in due course. The circular underscores the legally binding nature of such directives issued by the National Treasury under the PFMA, which are considered part of the regulatory framework for public finance and procurement.

From a legal perspective, this circular introduces new compliance obligations that interact with existing labour law frameworks, such as the Labour Relations Act, 1995, and the Basic Conditions of Employment Act, 1997. While the circular does not alter the substantive rights or obligations under these acts, it imposes a significant administrative burden and a new layer of reporting for public entities. Legal teams advising these entities must ensure that internal HR and disciplinary processes are meticulously documented to facilitate accurate reporting. Furthermore, the data collected will likely inform future policy decisions regarding public sector employment and potentially influence vetting processes, raising considerations around data privacy and the lawful processing of personal information, particularly concerning individuals who resigned without a formal finding of guilt. The absence of a clear framework for how this data will be shared and utilised across different organs of state, beyond the initial collection, presents a potential area for future legal scrutiny and development.

The National Treasury Circular 2023 marks a significant regulatory intervention aimed at enhancing accountability and integrity within South Africa's public sector. For legal practitioners, particularly those advising public entities or involved in public sector employment law, understanding and ensuring strict compliance with this circular is no longer merely good practice but a mandatory requirement. The implications extend beyond mere reporting; they touch upon the fundamental principles of good governance, anti-corruption efforts, and the responsible management of public funds.

Practitioners should proactively engage with their public sector clients to review existing HR and disciplinary record-keeping practices, ensuring they are robust enough to meet the detailed reporting requirements of the central register. Furthermore, vigilance is required regarding the development of Phase Two of this initiative and any subsequent regulations or guidelines concerning the use and sharing of the collected data. This circular is a clear signal that the era of impunity for those who resign to avoid accountability in public service is drawing to a close, necessitating a renewed focus on ethical conduct and transparent processes across all government entities.