Heavily regulated on paper yet toothless and weak in practice

The government spends about R600bn procuring goods and services every year. Little wonder that this space attracts the best and the worst of SA’s business community.

Procurement is a highly contested terrain, which is heavily regulated by a number of laws and regulations, including the Public Finance Management Act and the Municipal Finance Management Act.

These two acts are supported by other laws and regulations to help ensure that procurement is a fair and transparent process. However, intention and reality are often diametrically opposed in SA — as has been evidenced by the massive data leak, blowing the lid off the potential procurement transgressions at state-owned entities.

On paper, SA’s procurement process seems to be one of the cleanest in terms of transparency, governance and equity, but this is not the case in practice. Here’s why.

The legal framework governing the process is fragmented. At last count, there were 19 pieces of legislation, all dealing with procurement issues. These are coupled with secondary regulatory instruments that make procurement too complicated.

The procurement outlay is designed to ensure that those vying for state business have a fair crack at getting it. However, it has become apparent that the legal framework governing procurement lacks the appropriate teeth.

International studies indicate that the Public Finance Management Act would probably rank in the top three in the world in financial management legislation, says Treasury acting chief procurement officer Schalk Human.

Its core strength is that it has decentralised decision-making. So, a director-general, or accounting officer, is responsible for decisions. The legislation also makes provision for differentiation and recognises that energy, roads and other infrastructure cannot be bought in the same way.

Its weaknesses are that it has no teeth or strong enough sanctions and repercussions, or consequences for wrongdoing, says Human.

There is a chapter on financial misconduct, but the act is not sufficiently proactive in preventing rot. It is reactive in nature because it compels the accounting officer to respond to graft only once it arises.

Technically, the act does not make specific mention of sanctions, fines, disciplinary procedures, debarring corrupt suppliers or those who try to bribe, does not make provision for defaulter lists and a sufficient mechanism for alternative dispute-resolution.

By compelling accounting officers to report offences to law-enforcement agencies — the police, essentially — it raises the spectre of cases never reaching courts because dockets can disappear from the system.

The government, through the Treasury, is consolidating its supplier database. Before, every organ of state had its own database. During the consolidation process, the Treasury uncovered another procurement bugbear: black economic empowerment fronting. Many suppliers simply falsify their empowerment credentials because they want in on government business.

The departments of water and sanitation, public works and transport, and local government infrastructure units — in addition to state-owned entities — tend to attract a lot of corruption. The lion’s share of the procurement budget, R300bn, is spent here.

But as the state adopts a more proactive approach to stem procurement irregularities, unscrupulous operators will continue to play “catch us if you can”.

AS THE STATE BECOMES MORE PROACTIVE, UNSCRUPULOUS OPERATORS WILL KEEP PLAYING ‘CATCH US IF YOU CAN’