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Flawed tender processes could be costing SA R400bn a year

Government’s R800-billion annual procurement spend is compromised by corruption and the flouting of rules, says treasury veteran.

The second day of the long-awaited state capture commission of inquiry, chaired by deputy chief justice Raymond Zondo, revealed what many South Africans have long-suspected: government’s procurement and tender spend is bedevilled by corruption and abuse.

But the extent of the wastage might come as a shock.

In his submission to the commission on Tuesday, National Treasury acting chief procurement officer Willie Mathebula said the state’s annual procurement spend – through all spheres – stands at a hefty R800 billion.

Mathebula suggests, however, that an estimated 50% of the annual procurement spend doesn’t follow proper regulatory processes – intentionally. In other words, as much as half of the total procurement spend, or as much as R400 billion in rand terms, is possibly lost to corruption and the flouting of regulations by government officials.

“The size of government procurement does give rise [to] abuse of the system,” Mathebula said when advocate Leah Gcabashe, who led his testimony, asked him about the extent of corruption and irregularities. “We can ascribe more than 50% of [procurement] infractions to intentions to abuse the system or the different interpretation of rules.”

To put it in context, R400 billion is nearly half of the R1.3 trillion that the South African Revenue Services has to raise in tax revenue for the 2017/18 financial year. It’s also substantially higher than the R100 billion that public enterprises minister Pravin Gordhan has estimated South Africa has lost through state-capture corruption.

Testimony at commission

Mathebula is a veteran treasury staffer, having spent more than 15 years at the institution in various roles related to managing government’s procurement and supply chain management processes.

He was the first witness to be called by the commission, which has been mandated to look at corruption and fraud at various state organs in which high-profile politicians, including former president Jacob Zuma, have been directly or indirectly implicated. The commission was established by Zuma in January 2018 and kicked off on Monday in Johannesburg.

Mathebula’s appearance at the commission was not intended to implicate anybody in state capture; his testimony was intended to give context to the legal and regulatory processes around government procurement. Former deputy finance minister Mcebisi Jonas and former ANC MP Vytjie Mentor have implicated the Gupta family in state capture. Both were allegedly offered ministerial posts by the Gupta family.

When rules are flouted

Although Mathebula didn’t give specific examples of compromised government departments or state-owned entities, he described how the state could have been captured through regulatory shortcomings.

The procurement and tender process is governed by section 217 of the Constitution, which deals with preferential procurement and proper financial management of public monies.

Mathebula said other pieces of legislation – such as the Public Finances Management Act, the Municipal Finance Management Act, and the Broad-Based Black Economic Empowerment Act – ensure, in theory, that government officials comply with principles of fairness, competitiveness, cost-effectiveness and transformation in assessing tender bids.

Every system has loopholes, and in South Africa’s case, said Mathebula, it’s the systems themselves that allow government departments to deviate from rules when awarding tenders. They allow for tender bid evaluation processes that aren’t open to the public, and they don’t allow for interrogation of decisions to accept or reject bids.

Zondo raised concerns about the latter. “My observation is that a lot of corruption is connected with tenders. It’s an important part of what we [the commission] must look at and deal with; weaknesses in the systems. The issue of transparency [in the bid evaluation process] is important,” he said.

Mathebula said that although treasury recommends sanctions for transgressors, the institution doesn’t have statistics on whether its recommendations are successfully implemented. He has proposed a special tribunal to deal with procurement transgressors and fast track their prosecution. Treasury is also weighing up the merits of a process to audit the work of bid evaluation committees before they make a final decision to award a tender.

The commission resumes on Friday, with Jonas expected to make submissions.

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The implosion of the criminal justice system, and the incompetence of the investigating officers and prosecutors, are the roots of the corruption problem. The collapse of the state enables the corruption. The lack of accountability motivates plunder. The manifesto of the ANC is a document that justifies plunder, that is why the ANC won’t be able to stop corruption.

“But there is also another tendency that is common among people. When they can, they wish to live and prosper at the expense of others.

Now since man is naturally inclined to avoid pain — and since labor is pain in itself — it follows that men will resort to plunder whenever plunder is easier than work. History shows this quite clearly. And under these conditions, neither religion nor morality can stop it.

When, then, does plunder stop? It stops when it becomes more painful and more dangerous than labor.

It is evident, then, that the proper purpose of law is to use the power of its collective force to stop this fatal tendency to plunder instead of to work. All the measures of the law should protect property and punish plunder.” – Bastiat “The Law”

agree 100%. these judges are part of the political elite. With their phony English accents,over rated titles, even higher salaries and unaware that they don’t even dent the problems of SA…….can’t escape the colonialist common law system no matter how hard they try.

Your comment is absolutely spot on and makes it all the more depressing because a very severe downward trend has to be broken which is extremely difficult at the best of times. My theory is that humans (of all colors) are generally made up of two types: Bees – who are productive, observe society’s rules and work for the betterment of their society. The second group is locusts who see only what they can consume on the day with no concern for society or the future. In all societies, there will be a mix of these two but unfortunately our society has been badly skewed and only drastic (correct) action by government will turn this around.

Sensei, well narrated!

Every time I see a fellow South African driving by in a luxury German car, with doubt in my mind how could such a person afford it (the person may seem more fitting on a farm tractor or as labourer), then I think about tendering, BEE, and all the ‘wastage’ at SOE, etc.

The “wasted” monies goes SOMEWHERE…it doesn’t disappear into a pit! It’s very convenient for some (elite) parts of our population, that will never be able to live like that. This system is unsustainable (just like Apartheid, and we know what happened to that), and the whole country will pay the financial price. That’s why we’ll see more and more unraveling and deterioration in all spheres of SA life….it HAS TO happen. (Sadly)

Who cares about having skills, working hard or being innovative when you can create a whole secondary economy through bribery and corruption? Let me explain: someone applies for a trade license and the bureaucrat says, “I can expedite your application but then I want a tip. Otherwise your application will go missing”. For this you don’t need skills, you don’t need to be competitive nor innovative. You just need to have legislation and everybody must be in on the deal. After all who wants to study and write exams at university when you can get money for jam? It is that simple and that is why the whole of Africa will never get out of the quagmire it is currently in. Because in Africa narrow self-interest always beats big picture thinking.

Can someone please help me with my dummy head maths: is R400 billion half of R1,3 trillion, as this article indicates? (PS. I never liked my primary school maths teacher)

Bit dramatic but they state nearly half, far off, but adds the required drama

Half is 650 billion.
400 billion is nearly half of 1.3 trillion. More accurately a third.

If SA’s inflation rate was like that of Venezuela currently (with over one million % inflation), the question to ask would rather be:

At WHAT DATE/TIME is the R400bn referred to?

Rounded off to the nearest R250 billion..?

Of course it’s rounded to the nearest 250bn, it’s pocket change, no reason to keep track of it.

Lets just correct the title. It is costing the 4% that pay tax, the R650 billion that these thieving low life slime balls are stealing.

The dilly dallying in dealing with it is just giving them more time to loot what is left. When it is all gone they will be able to go back to living and behaving like savages in the rest of Africa.

Depressing! But look at the bright side, we have over 9000 species of fynbos that doesn’t grow anywhere else in the world!!

And we have Rooibos tea, I mean if that isn’t a reason to be cheerful I don’t know what is 😛

And we also have The Foreshore Freeway Bridge….i mean the unfinished highway in Cape Town. 🙂

And the weather is the best.

And remember, whilst there are many other countries that have far less corruption that we could go to, unfortunately there are also very many that have much worse conditions that we could emulate.. so keep pushing towards a better system, because it can get worse!

… and we have beautiful mountains in CT, oh sorry, I don’t walk them anymore because of the knife point muggings

I decided to convert the problem of muggings on Table Mountain into an opportunity. For their black belt grading the students in my dojo must go for a 4-hour hike on Table Mountain. They have to carry cameras, cellphones, wallets and handbags. If they return with all the equipment intact they deserve the black belt. Maybe that will also clean up Table Mountain. A win-win solution.

…and the smell of braaivleis fires over weekends!

SA have great golf courses as well (…just pay the guy looking after your car, and Bobs your uncle 😉

There will be zero effective results from the corruption or any parliamentary investigations, no charges or consequences for anybody. Dudu has defied them for a year now with no consequences, Steinhof cronies will do the same, won’t appear. Its all a big SA joke.

Another commission of enquiry ….. how many are there and what have they actually achieved? Sigh ….

Why do you think the capitalist motor manufacture’s eg Mercedes-Benz, Land Rover, BMW and other despised invaders and colonialist are making a killing in SA – the anc cadres just love taxpayer funded bling they never have to earn the right to own let alone the competencies to “buy” through their own endeavours?

The circa 50% or R400bn irregular procurement spend is not ALL lost! What is lost to the taxpayer is the unnecessary premium paid for goods due to the flouting of proper tender regulations. The custodians of procurement (Supply Chain Management) are in itself a major expense adding little value. If they can’t follow basic rules, why continue with a system that clearly are open to manipulation. SCM at municipal level a law onto themselves and no doubt a major contributing factor to the lack of service delivery.

This should be by far the biggest news item of the day, yet the bulk of the populace (black, white, brown, green, purple and those with polka dots) are far to busy discussing comments from two marginal idiots – one a Greek South African and the other one with orange features sitting in an oval office in a far away land.

Total budget for 2017 was 1.6trn – so 25% of our governemnt spending goes down the drain. If SA were a company we would have been out of business loooong ago

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