Few can dispute that public procurement is a crucial function of the state, as it enables the delivery of public goods and services, such as infrastructure, healthcare, education and social welfare.
However, public procurement is also prone to corruption, mismanagement, and inefficiency. Think state capture — a shameful post-apartheid scandal in which politically connected business leaders used their ties to line their pockets with hundreds of billions of rand in state contracts.
One of the ways to ensure that public procurement — worth nearly R1-trillion a year — is fair, transparent, and competitive is to follow established procedures that require open and competitive bidding for contracts. There is a legal framework for it. It is called the PFMA, a sweary initialism to brazen politicians but one that reminds honest public officials of their moral duty to use public funds efficiently and effectively.
However, in some cases, these procedures, under the Public Finance Management Act (PFMA), can be bypassed or modified through mechanisms such as contract deviations and expansions.
Both might have valid reasons, such as urgency, emergency, or technical necessity. However, deviations and expansions can also raise red flags and indicate a lack of planning, abuse of discretion or collusion with suppliers. This is the loophole that crooked politicians exploit to ruin crucial entities such as Eskom and Transnet, leave municipal finances in tatters, and weaken our social compact.
“Twenty years of frustration which includes a decade of state capture pitilessly exposed the flaws and weaknesses in the public procurement system, flaws and weaknesses which have been exploited by criminals to inflict lasting damage on the SA economy. The promise of service delivery so fundamental to the betterment of our society has not materialised.”
This lament from chief justice Raymond Zondo in his state capture report calls for radical changes to the system, which may be in the offing if the Public Procurement Bill, tabled in June, is fine-tuned enough. Until then, the deviations and expansions of contracts should be used sparingly and only in exceptional cases. This week’s report by Corruption Watch and Geo Quinot, a professor at Stellenbosch University, shows some alarming trends in their use by organs of state.
Admittedly, the value of deviations declined significantly — by more than two-thirds — to almost R12bn in 2023 compared with R34bn in 2021. Even so, the number of reported deviations surged more than threefold during the period, from 544 to 1,892. This disturbingly suggests that deviations have become common practice rather than exceptions.
The report also shows that the number of reported expansions declined steadily between 2017 and 2023, from 1,068 to 673. However, the value of expansions almost doubled from R80bn in 2021 to R157bn in 2023.
The report raises serious concerns about the risks and implications of these trends for public procurement. It should not be undermined by deviations and expansions that compromise its integrity and effectiveness. It is a timely and important contribution to the debate on how to ensure public funds are spent wisely and well.
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