At parliamentary hearings on the Public Procurement Bill this week, one province pushed back at the planned centralisation of the procurement system, warning it could affect service delivery.
Sanele Khomo, a former chief administration officer for demand and acquisitions in the KwaZulu-Natal provincial treasury, likened plans by the National Treasury to create a centralised procurement office to a “hand-holding exercise”.
“The bill itself does seem to create a lot of hand-holding exercises as provincial treasuries are not in a position to make determinations themselves. There are things that the bill should let go of as the provincial treasuries are equally capable. If a provincial treasury is of the view that a determination by an institution does not align with the act, that provincial treasury can review it,” he said.
Khomo, who is now head of supply chain management at uMngeni local municipality, was making submissions to the standing committee on finance's hearings on the contentious bill. Nonprofit organisations, organised labour and anti-corruption watchdogs also made presentations.
The bill was drawn up in response to the Zondo commission of inquiry into state capture, which recommended an overhaul of public procurement to prevent corruption.
It proposes the establishment of a public procurement office (PPO), which would have the final word on the awarding of tenders. The state spends R900bn on procurement.
The PPO would be empowered to determine how the public, civil society and media access information to scrutinise procurement decisions. It would also house a tribunal appointed by the finance minister to adjudicate tender disputes.
Another core aim of the proposed legislation is to deal with a Constitutional Court ruling that invalidated regulations made under the Preferential Procurement Policy Framework Act, specifically concerning the tender scoring system, which allocates 80 points for price and 20 for B-BBEE status.
The hearings underscored two key issues: the need to address the procurement weaknesses that allowed years of state capture; and deindustrialisation
The draft bill gives preference to small enterprises and those in townships, rural or underdeveloped areas, and to black people, women, young people and those with disabilities. Preference thresholds would be governed by regulations determined by the minister, while state organs would have to develop their own procurement policies.
Khomo advised that public procurement offices be established at provincial treasury level for better co-ordination of procurement processes.
“This can assist in ensuring that there is a structured approach from national to provincial treasuries in dealing with matters relating to public procurement. Since the act delegates some of the powers to provincial treasuries, the act must also establish a provincial public procurement office to handle provincial scale matters,” he said.
The director for governance and risk at the department of defence, Fikile Khumalo, said they needed more clarity on the process of securing exemptions on the procurement of material related to national security, beyond the finance minister's discretion.
“Some of the things the department procures are sensitive due to national security, so the department appreciates the provision for exemptions,” she said.
The bill says the minister of finance may exempt a procuring institution from any provision of the act if national security “could reasonably be expected to be compromised”.
Khumalo said the department was also not clear on the extent to which the bill enforces local procurement as some goods and services procured by the defence forces could not be found locally.
The South African Institute of Chartered Accountants executive for public sector and enabling competencies, Natashia Soopal, said noncompliance with procurement guidelines often led to overpriced goods and services.
The government’s annual procurement spend.
— IN NUMBERS: R900bn
“The bill should not be considered in isolation as legislation that ensures processes are followed. It should be looked at in conjunction with other things, like the resources available in procurement departments, ethical guidelines and other legislation and governance.”
Soopal said the bill should include additional responsibilities for procuring institutions, including consequence management when there is noncompliance, and processes to manage the procurement process to receive proper goods and services.
“Suppliers are not held accountable and they rotate from one department or entity to the next. It has become important for procuring institutions to ensure that they receive quality goods and services and that the guidelines are followed.
“The bill should incorporate skills and technical requirement units. The responsibility should be included for the procuring institution to ensure that the required skills and competency are present from suppliers,” Soopal said.
The hearings on Tuesday and Wednesday underscored two key issues: the need to address the procurement weaknesses that allowed years of state capture; and deindustrialisation, which business groups say can be reversed using the government procurement system.
Herman Pillay of the Apparel and Textile Association of South Africa recommended three changes to the bill: that local manufacturing provisions in tenders are considered pre-qualification criteria, not just a preference; that the national government makes preferential guidelines firm and binding; and that the bill is explicitly against corruption.
“Bidders will still be able to win if they generate enough points from other preferences. This is the case in sectors that have the potential to revive our manufacturing base. If the bill gives local manufacturing and local content the power to be pre-qualified, this could be used to create jobs.”
Pillay said 12,000 jobs and R6bn could be lost if the clothing, textile, footwear and leather sectors were not assisted, and many enterprises owned by black people, youth, rural citizens and women would face a risk of closure.
Corruption Watch's head of legal and investigations, Nicki Van 't Riet, said the Constitutional Court determined that after the damage wrought by state capture, procurement should be done in a transparent, efficient and cost-effective manner.
“The bill must have the economic transformation of South Africa as its driving purpose. It must achieve open and transparent procurement where corruption is prevented. While promoting B-BBEE, it must prevent fronting and promote fairness and access to information to the public. Unfortunately, in its current state, the bill does not meet these objectives.”
Van ‘t Riet said Corruption Watch supported the finance minister's plans to present legislation to address fragmented public procurement and the automatic exclusion of public office bearers and politicians from the bidding process.
“A technology-based procurement system is a good way to modernise the supply chain system, but the bill must be revised to codify the details of the e-procurement system and this should not be left to interpretation.”
She said that while the inclusion of a public procurement tribunal in the bill was welcome, it needed a minimum of 10 members with separate oversight and decision-making roles where all tribunal members could perform their functions independently and free of implicit pressure.
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