SA’s chief procurement officer has a plan to
For someone who inadvertently made waves for newspapers with a decision announced this week for government to cut its ad spend, he is surprisingly nice when chatting to a journalist. Kenneth Brown, the state’s chief procurement officer, is a bear of a man; he towers over most of the people assembled at the tabling of the 2016 budget.
The government’s Imbizo Media Centre in Cape Town, the centre of budget affairs on Wednesday, is buzzing with politicians, officials and staff carrying bulky documents dealing with South Africa’s finances. Journalists are corralled and locked into the centre from 6am so that they can trawl the details and present them to the public.
The breakfasts have in the past been scrumptious – delicious Cape Malay samoosas, pies and delicate sandwiches. This year, it’s Ricoffy and Ouma rusks. Times are clearly tough.
Brown is Finance Minister Pravin Gordhan’s secret savings weapon. Government spends R550 billion a year buying goods and services. Next year, it will spend R800 billion on big-ticket infrastructure, including roads, dams and schools, as well as various municipal services. But as Auditor-General Kimi Makwetu often painstakingly points out, it is spent very badly.
Enter Brown. And his team. I want to profile him alone, but he brings along his band of three and allows them to do the talking.
With him is Rakgadi Motseto, his right-hand woman, who is working hard to ensure suppliers are paid within 30 days. Recently, she had to comfort a construction company owner who was owed R100 million by the state. He was paid, but Motseto estimates R120 billion is still owed to suppliers and it will be her task to ensure the system is ironed out.
Whenever you attend small-business meetings, the slow rate at which government pays is a complaint. President Jacob Zuma has promised in several state of the nation addresses to get the payment period down to 30 days.
Because of our system of separate capitals and the three-tier system of government, the state’s travel and accommodation budget is a whopping R10 billion a year.
Estelle Setan, another member of the central procurement office’s management team, is hard at work to make savings here by negotiating directly with airlines, hotels, car rental and travel management companies for better deals. She says this can result in huge savings, cutting back on the state spending R900 million in commission to travel agents – three agents alone earn R550 million. “We can easily bring this down to R200 million a year,” she says.
That Brown insists on an interview with his top team tells you about the kind of leader he is. I am not meant to like him or his message (because of the potential impact on newspapers), but I do. Technology is disrupting many industries and print is only one of them.
Brown’s secret weapon, in turn, is Schalk Human, a career bureaucrat who exudes efficiency. He is able to tally figures in seconds, reeling off the savings to be made by using the new centralised procurement system that has been in place for several months, but which will be made compulsory for use by national and provincial government departments from April 1.
By July 1, all local government entities will have to buy services using this system too. This is where it gets tough for newspapers. Before Human’s system, departments would advertise. “It costs – we spend half a billion rand on tender advertising,” says Human, who worked for years as the Accountant-General. Add in the gazetted advertising measures the state had to undertake to ensure fair advertising and notification to its suppliers, and the fiscus’ bill was about R1 billion a year. That is going to be saved now as the central database begins to work at scale. I ask if departments can dodge the system, but Human has sealed up that problem too. Departments will not be able to pay using the state payment system unless the tender has been advertised centrally with them. The savings are huge – for businesses, which no longer have to apply to dozens of departments; and for government, which no longer has to fork out for printing and advertising bills – and the costs are small.
Technology can be cheap. Human puts the web hosting bill of the system at R16 000 a month, although he is getting bigger servers to cope with the demand for tender uploads once the system is made compulsory.
For suppliers, the system is free and always on. It lists tenders by province, sector and commodity type. And it works, says Human, because it has been significantly used in its test phase. Already, 2 800 tenders, worth R40 billion, have been issued via the system. It is visited 2 757 times a day and 1 000 tender documents are downloaded daily.
Where do tender entrepreneurs come from? Gauteng is the most active, says Human, followed by KwaZulu-Natal and the Western Cape. About 12% of the hits on the site come from Kenya, the Netherlands,
by Ferial Haffajee
the US and other countries, indicating that international businesses are exploring trade with government.
“Our prime purpose is to make it easy for multiple businesses to have access to opportunity,” says Human. “And the site cuts opportunity costs.”
While it has been lauded as a corruption-busting innovation – because the tender system is often where graft happens – Brown’s philosophy is that there will always be some leakage – but if the procurement system is driven by technology and is efficient and transparent, this will limit the risk.
This is because it makes the entire system transparent – you can see who has won and who their closest competitors were. It should speed up the system, too, as owners who want to do business with the state now submit a single set of documents that are verified electronically. In South Africa, this means supplying a tax certificate, a BEE certificate and confirmation of company registration.
Brown says international benchmarks show that ranking efficiency higher than anti-corruption measures as an outcome is best international practice. And it is easier to manage a single supplier database rather than the 3 000 different ones that previously littered the state procurement system.
“If you are a tender defaulter, thou shalt not use the system,” says Human. I sense he is only half-joking.