Microsoft CEO Satya Nadella in April 2020 noted, ‘We’ve seen two years’ worth of digital transformation in two months’,2 and the World Economic Forum has declared the potential for Fourth Industrial Revolution (4IR) technologies as limitless. Technologies like artificial intelligence (AI) and the internet of things (IoT) serve to provide solutions to a host of socio-economic challenges and offer a new vision for creating more efficient governments.3
In South Africa, we have seen the Presidential Commission on the 4IR report gazetted late in 2020.4 Yet it appears that there are still extensive hurdles for most public sector organisations to successfully transform their technology in order to improve efficiency and accountability in delivering services and fulfilling the public sector mandate.
Inheriting complicated legacy challenges and operating in an environment of mistrust often makes accessing talent difficult and prevents leaders in the public sector to make quick transformative decisions.5 Policy is often used as the scapegoat for the unsuccessful implementation of strategies and plans. However, with the current economic, ethical, environmental, governance and social challenges facing public sector organisations in South Africa, we need to look beyond policy and legacy issues and identify the points of entry rather than the barriers to entry − not dismissing the fact that policy at the appropriate level of government is integral in the governance of any ecosystem.
By understanding and appreciating the complexities of a public sector ecosystem, the accounting professional in public service will be equipped to redesign strategies, innovate performance objectives, assess crisis leadership skills and identify missing core competencies within their organisations. Furthermore, the challenges in relation to society’s trust in the public sector ecosystem are complex and the public is looking towards the accounting and auditing profession to find solutions to enhance overall credibility, performance and output.
In recent months, the South African public sector landscape has shifted significantly. The COVID-19 pandemic as well as historic and new societal challenges arising from the pandemic influence the way accounting professionals are required to respond to these complicated, complex and often chaotic situations. Responding to the challenges and leading the much-needed technology transformation may be derived from entering an existing ecosystem or orchestrating the emergence of a new ecosystem.
The term ‘ecosystem’ has gained popularity as a buzzword in recent audit reform literature. It is ubiquitous in scholarly and applied discussions of strategy and was first introduced in a business context by James Moore in 1976.6 The term is borrowed from the field of natural sciences that defines it as ‘a biological system composed of all the organisms found in a particular physical environment, interacting with it and each other’.
The term ‘ecosystem’ has evolved to encompass a multitude of definitions by various scholars and business practitioners. Simply put, it refers to the actors who interact with each other in order to benefit from each other’s activities, where all the actors offer a unique product or service and seek to drive shared value.
The COVID-19 pandemic has exacerbated the need for the urgent transformation in the public sector for quicker adoption of the use of 4IR technologies that have the capability of fast-tracking service delivery, monitoring spend to prevent fraud and corruption, improving the credibility of public sector financial and performance reporting and consequently improving the organisation’s performance. Many academics, consultants and 4IR steering committees have written extensively on the 4IR and provided insight into the various associated technologies. By drawing inferences from these writings, I have explored how some of these technologies are relevant to public sector organisations along with how they could be leveraged to drive credibility of financial reporting and improve performance. I offer a view to orchestrating a shift in the public sector financial and reporting ecosystem.
he finance units of public sector organisations are frequently expected to provide real-time information to various layers of their respective departments, not to mention gathering copious amounts of hard copy historical evidence for internal and external auditors. The lack of integrated systems and internal controls results in reported information that is not accurate and complete, reliable or relevant. Staffing constraints and inadequate skills contribute to poorly prepared financial statements and annual reports. The COVID-19 pandemic was a typical instance where data was required in real-time in order to respond to what may be defined as a chaotic situation for many public sector organisations.
Technology-led strategy for financial and performance reporting
A technology-led strategy (beyond the Medium-Term Strategic Framework, annual performance plans or the respective departmental objectives) is required to understand technology’s role in supporting financial and performance reporting and re-imagining the role for technology that is focused on proper integration and credible reporting.7 Next-generation cloud-based architecture and renewing the core systems or actually implementing it (such as enterprise resource planning, ERP) will enable financial accounting data extraction to build machine learning algorithms for critical financial management decision-making − and thus aligning all decision-making processes with processes required for reporting. (‘Machine learning is an application of artificial intelligence (AI) that provides systems the ability to automatically learn and improve from experience without being explicitly programmed’8.)
Human-centric policy on upskilling and re-skilling finance unit staff
Apart from the lack of capacity and inadequate financial and accounting knowledge of public sector organisations’ finance teams, modern technology functions also require skilled analysts and technologists to deliver quality work proficiently.
This may be achieved by defining clear roles in the technology-led strategy and budgeting for the re-skilling and up-skilling of finance team employees through stackable, micro-credentialled courses that are aligned to the industry.9 Developing accredited courses in collaboration with educational institutions and accreditation bodies (for example SAICA, FASSET, higher education institutions, the private sector) will form part of a life-long commitment to learning and consequently improving the quality of the public sector organisations financial and performance reporting. One may identify a clear link here towards achieving government’s goal of professionalising the public services.
National government is currently seen as the main orchestrator of the public sector ecosystem and as such all levels of government organisations depend on national government to design the architecture, structures, governance, activities and roles of the actors within the ecosystem. Embedding social expectations and the public as actors of the ecosystem is core to the public sector ecosystem concept.
Collaboration across departments and initiatives driven by finance professionals within public sector organisations may just be the event required to orchestrate a shift in the ecosystem and to break away from the cycle of poor performance including fraud and corruption, unauthorised, irregular and fruitless and wasteful expenditure. Using supply chain management as an example, an invitation by accounting professionals to National Treasury to reinforce the central supplier database with blockchain technology may be proffered. A distributed ledger will ensure that a suitable match in the supply and demand of goods and services is achieved. This will be beneficial for small and medium-sized enterprises as they will only be providing goods/services aligned to their capacity, creating sustainable and equitable growth. Blockchain technology will eliminate the opportunity for fraud/corruption due to the nature of blockchain technology enabling independent, third-party and multiple verification/vetting processes.
The window for successful technology transformation is usually small and leveraging off the momentum of the 4IR can be used as a catalyst for technology transformation. An excerpt of the PC4IR report states, ‘We recognise this moment as containing within it, the potential to use technology to address the most challenging development problems faced by South Africa and the rest of the continent.’10 The conclusion is that accounting professionals in the public sector must unite in fast-tracking the pace of change at the same pace that technology has been disrupting businesses in order to orchestrate a shift in the public sector ecosystem and drive shared value for the actors of this integral ecosystem.
1 KPMG 2020, Digital is not the future it is today, https://home.kpmg/xx/en/home/industries/government-public-sector/the-new-reality-for-government/digital-is-not-the-future-it-is-today.html.
2 S Nadella 2020, 2 years of digital transformation in 2 months, https://www.microsoft.com/en-us/microsoft-365/blog/2020/04/30/2-years-digital-transformation-2-months/.
3 World Economic Forum 2019, Why the 4IR is a fast track to African prosperity, https://www.weforum.org/agenda/2019/09/why-the-4ir-is-a-fast-track-to-african-prosperity/.
4 Presidential Commission on the 4th Industrial Revolution (2020, Summary Report and Recommendations of the Presidential Commission on the 4th Industrial Revolution, Tshwane: Department of Communications and Digital Technologies.
5 McKinsey 2021, The next chapter: driving technology leadership in the public sector, https://www.mckinsey.com/industries/public-and-social-sector/our-insights/the-next-chapter-driving-technology-leadership-in-the-public-sector.
6 R Adner 2017, Ecosystem as structure: an actionable construct for strategy, Journal of Management, 43(1), https://journals.sagepub.com/doi/full/10.1177/0149206316678451.
7 McKinsey 2021, op cit.
8 Expert team.ai 2020, https://www.expert.ai/blog/machine-learning-definition/.
9 Presidential Commission on the 4th Industrial Revolution 2020, op cit.
10 Presidential Commission on the 4th Industrial Revolution 2020, op cit.
Safiyya Dawood-Esakjee CA(SA), Senior Manager, KPMG Department of Professional Practice Audit and Assurance