An independent investigation by a leading global policy forum has found SA’s public procurement system is inconsistent, inefficient, lacking in transparency and vulnerable to corruption.
The study, by the Organisation for Economic Co-operation and Development (OECD), has made a series of recommendations to improve the operations and integrity of the system, as well as the legislative framework, only some of which are addressed in the government’s controversial new Public Procurement Act.
The National Treasury, which commissioned the OECD study, has committed to a comprehensive action plan to address the recommendations.
“Improvements in our procurement system are at the core of enabling a public sector that can deliver services economically, effectively and efficiently,” Treasury director-general Duncan Pieterse said.
“Unfortunately — and this is part of what has been pointed out in the report — the current system is fraught with inefficiencies that make it uneconomical, cumbersome and open to abuse,” he said at the launch of the report on Monday.
SA spends 15% of its GDP on public procurement, compared with an average 13% for OECD countries. But despite this, it has a poor track record on getting value for money on public spending and delivering good quality public services and infrastructure.
The Zondo commission also found that SA’s public procurement systems played a role in enabling state capture and made a series of recommendations to address this.
The OECD study was conducted using its methodology for assessing public procurement systems (Maps), which has already been used to assess 39 countries and identify international benchmarks.
The SA study was conducted before the new Public Procurement Act, which was signed into law by President Cyril Ramaphosa in July but has as yet no effective implementation date.
The act puts in place the single legislative framework and introduces some of the transparency and the standard, digitalised processes recommended by the OECD, but it has been the subject of controversy as so much of its focus is on preferential procurement from black-owned enterprises and so-called “set asides” for various disadvantaged groups, rather than on making procurement processes more efficient and less corrupt.
One of the authors of the OECD study, procurement expert Costanza Caputi, said the study had found systemic weaknesses in controls and accountability. The system was highly vulnerable to corruption, with weaknesses including lack of enforcement and weak internal controls and high levels of irregular expenditure.
Also, the external audit function was seen as punitive on minor irregularities but not sufficient to address substantive issues, Caputi said.
Watchdog
There was no single anticorruption agency in SA with the mandate and authority to tackle corruption, she said.
The study recommended a strong independent and capable anticorruption body be established to take responsibility for preventing and deterring corruption and tackle weaknesses in the system.
But Mendoe Ntswahlana of the office of the chief procurement officer at the Treasury said that combating corruption was not limited to procurement and therefore needed to be elevated to the relevant authorities.
The study pointed to systemic capacity and skills challenges in the office, which has filled only 80 of its 140 approved posts — a vacancy rate of 43%, which is three times the Treasury average.
It found 30 gaps in the legal and regulatory frameworks governing public procurement, which it said were complex and fragmented and not aligned with other legislation, raising concerns about lack of certainty and different interpretations.
The standards for open competitive bidding procedures were not well defined and there was wide discretion, the study found. The high level of local discretion on disbarring suppliers from doing business with the government risked inconsistency and bias. And there was no single policy or strategy on sustainable procurement, particularly on environmental sustainability.
Low compliance
OECD senior policy analyst Matthieu Cahen pointed to the need for a stronger digital ecosystem and to the low compliance rate of organs of state with publication requirements.
There was also limited insight on procurement activities because of the compliance rate by organs of state with publication requirements — only 12% of organs of state which had registered tenders had uploaded their procurement plans for the latest year.
The study used data from contracts and surveys to probe how the procurement system operated in practice, identifying 19 gaps out of 26 assessment criteria.
“We think that there is room for improving the first phase and the last phase of the procurement cycle, which are procurement and contract management... In addition we found that transparency and stakeholder engagement are two important areas which should be improved throughout the procurement process,” the World Bank’s Knut Leipold said.
The OECD’s Maps project partnered with the World Bank and the African Development Bank on the study.
The Treasury will develop a road map to address the deficiencies identified by the report. Pieterse said the new act on its own was insufficient to resolve procurement challenges.
The gaps identified by the OECD assessment were broad based, and “largely confirm what the National Treasury has known, what civil society organisations and others have been raising and reporting, and what the public has been experiencing,” he said.
“This evidence-based process therefore provides SA with independent insights for strengthening its procurement system. It is our collective commitment to earnestly consider the report,” he said.
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