In the wake of reports that Covid-19 funds are under siege from supposed covidpreneurs, Finance Minister Tito Mboweni has said that National Treasury is looking into tightening procurement processes which might include centralising the procurement of personalised protective equipment (PPE).
Mboweni was speaking during the National Assembly debate of the Adjustments Appropriation Bill, in which opposition parties raised criticism on supposed tender fraud related to Covid-19 funds.
The assembly passed the bill, which looks to reprioritise government spending in order to account for the health, social and economic needs necessitated by the Covid-19 pandemic.
Revenue is expected to fall by some R304 billion this year due to the Covid-19 economic restrictions implemented by government and the disruptions in global supply chains. The pandemic fallout has left Treasury with a record-high budget deficit of 15.7% of GDP compared to the February budget forecast of 6.8%.
“We have been reading reports about possible acts of corruption with some of the contracts awarded with respect to Covid-19 equipment,” said Mboweni.
“To that extent, I have had discussions with the National Treasury director-general and his exco to see how we can further tighten these procedures in this regard.
“One of the things we are thinking about is how to centrally purchase some of the equipment required, given the capacity issues between ourselves and the national Department of Health.”
The Special Investigating Unit (SIU) is investigating a number of tenders that appear to have been awarded irregularly. This follows President Cyril Ramaphosa signing a proclamation empowering the unit to probe corruption in the awarding of Covid-19 funds. There have also been reports that politically exposed persons may be linked to irregular tenders.
But Mboweni also tried to dispel the notion that all contracts awarded for Covid-19 needs were innately corrupt.
“I must emphasise that the feeding frenzy that is going on now in the country, that every contract or tender issued is equivalent to corruption, is incorrect and to assume that a tender that is R125 million is a gift to someone is incorrect,” he said.
“That allocation must still go and buy the relevant goods.”
The devil is in town
Mboweni also moved to set the record straight about the nature of the $4.3 billion loan from the International Monetary Fund (IMF), saying the perception that the “biggest devil has arrived in town” is also wrong.
The finance minister explained that every year when the budget is tabled Treasury lays out the revenue, expenditure and the shortfall for that financial year.
This shortfall, or funding gap is normally plugged through domestic and international borrowing on the bond market – which Treasury refers to as the “annual borrowing requirement”.
Last year, when South Africa was not battling a health and economic crisis stemming from a pandemic, the government borrowed $5 billion on the international bond market. The bond’s interest rates were much higher than the very low 1.1% interest rate attached to the IMF loan, said Mboweni.
He said government-issued Treasury bonds are auctioned on a weekly basis in the domestic market to make borrowings of up to R20 billion a week to finance the funding shortfall.
“The R70 billion or so loan from the IMF pales in significance to these weekly borrowings that we do and the international bond issues, if we had to do any,” said Mboweni.
The IMF loan, which is a rapid funding instrument for emergency situations, also does not come with structural adjustment conditions that are traditionally attached to its loans. But the government has made a number of commitments related to stabilising debt and implementing reforms in its Letter of Intent motivating for the approval of the loan.