Action on procurement irregularities must be the focus of Procurement Bill 

13 July 2020

Political meddling in procurement of goods and services is the main reason for our country’s regression

The Organisation Undoing Tax Abuse (OUTA) recently made submissions to the National Treasury on the Public Procurement Bill, emphasising the importance of the successful implementation of a strong and strict procurement process.

“The Public Procurement Bill provides long-awaited legislative reform which aims to better public spending. Tax money must be invested in the country, and it must work for the citizens and businesses,” said Julius Kleynhans, Strategy and Development Executive at OUTA. “We made some constructive comments on a good bill, and trust that it will enhance accountability when it comes to putting hard-earned taxes to work in the future.”

At a time when tax revenue is shrinking and budget deficits are widening, the best possible management of public procurement is of critical importance. It is imperative to ensure that the contracting of goods or services is done in accordance with a system that is fair, equitable, transparent, competitive and cost-effective, as envisioned in the Constitution of South Africa.

“Taxes should have changed the socio-economic landscape of South Africa for the better by now. Unfortunately, we have seen organised corruption and exploitation of preferential procurement legislation, resulting in the abuse of vast amounts of taxpayers’ money.  In a vicious cycle, it seems that political influence has been leveraged to channel public resources to connected companies and individuals, who in turn provide generous donations and support for those parties and persons who determine bid adjudications,” Kleynhans added. 

OUTA also raised its concerns about government spending on remuneration of management and executives, despite the public sector’s mandate to spend and operate efficiently in the public interest. “Private sector industries optimise resource use and become financially self-sustainable, while state-owned entities, state departments and municipalities don’t. Taxpayers must then bail them out, always with zero consequences. This now needs to change,” said Kleynhans.

OUTA highlighted some of the most important focus areas to curb corruption or procurement to include in the Bill which included: 

Deviations from accepted procurement practice

Expansions of contracts well above original value

Extensions of contracts to include scope that should be tendered out

Fronting issues

Single sourcing

Copying and pasting the requirements of a specific supplier’s product brochure or website into the Terms of Reference (TOR)

Writing the requirements of the TOR in such a way that only one supplier can provide the goods or services

Collusive bidding practices

Political interference to sway the outcome of a tender

Intergovernmental procurement

Inadequate oversight: why has the National Treasury never taken the blacklist seriously?

The state capture saga furthermore revealed the erosion of law-enforcement agencies that - despite all the requisite legislation being in place - have failed to curb corruption and criminal contravention of procurement legislation. There have been little or no consequences for individuals, directors and companies known to have stolen from taxpayers.

“The solution should be proactive. The proposed Public Procurement Act, supported by related legislation, must provide for the exercise of heavy penalties, seizure of assets, naming and shaming and holding to account those accounting and executive authorities who contravene laws that govern how taxpayers’ money is spent,” Kleynhans said.

OUTA’s submission presents an analysis of the proposed Public Procurement Act. This was done to assess its ability to not only prevent the malpractices outlined above, but also to contribute to rational, effective and sustainable targeted social expenditure in South Africa.

OUTA’s analysis should be read with the Draft Public Procurement Bill.

Issued by Julius Kleynhans, OUTA Strategy and Development Executive, 13 July 2020