The accounting authorities of state-owned enterprises (SOEs) should have far greater power over procurement than is given them under procurement regulations and Treasury instructions, department of public enterprises chief director Vuyo Tlale said in parliament on Wednesday.
Tlale made several proposals on how the procurement system could be facilitated by giving the accounting authorities of SOEs powers now vested in Treasury. The current system, she said in a briefing to parliament’s public enterprises committee, was time consuming and could have cost implications for SOEs, which have often complained about the onerous regulations and instructions that limit their agility, flexibility and competitiveness, and compromise their ability to deliver on their strategic objectives.
Transnet group chief procurement officer Vuledzani Nemukula and Eskom acting chief procurement officer Jainthree Sankar agreed with these views.
Tlale said the regulatory environment had increasingly led to SOEs receiving qualified audit opinions related to procurement and contract management.
“One of the main challenges in public procurement is to strike an appropriate balance between operational efficiency and compliance,” Tlale said. “Major state-owned companies operate in a highly competitive and challenging environment. More agile and responsive decision-making processes are required.”
Tlale said the department had submitted a document listing the legislative challenges and the proposals to deal with them to the Treasury for consideration. Treasury directives were issued with no proper or limited consultation and were sometimes unsuitable for SOEs, she said.
Among the proposals submitted to the Treasury was that it abolish the requirement that it approve all contract variations and amendments above certain prescribed thresholds, as that had contributed to a marked increase in the irregular expenditure of SOEs as some contracts expired due to the long timelines required. The accounting authority should be responsible for these transactions.
The requirement for Treasury to approve all deviations from a competitive bidding process and to restrict suppliers should also be removed so that accounting authorities had the power to make these decisions, with the Treasury being given reports on these matters, as well as the time to object to decisions taken.
Accounting authorities should also be able to engage in post-tender negotiations to achieve a competitive price and cost savings, to cancel tenders and undertake emergency procurement where there was a threat to security of supply. There should also be thresholds for the condonation by the Treasury of irregular expenditure.
Tlale also raised concerns about the requirement that SOEs use the Treasury’s central supplier database, the information of which was not verified, with the result that SOEs still needed to verify the supplier information. SOEs should be allowed to maintain their own internal supplier database, subject to Treasury verification at any point, Tlale said.
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