Public procurement is the single largest corruption risk, particularly in developing countries. Transparency International estimates that governments in low- and middle-income countries spend about 50% of public funds buying goods and services from the private sector.
This compares with just 30% in high-income countries.
It’s therefore no surprise that public procurement systems in developing countries are especially vulnerable to corruption.
South Africa is no exception.
The deep fragmentation of laws governing procurement has arguably contributed to ineffective regulation and public oversight. The country’s recently proposed draft Public Procurement Bill is a welcome development, since it aims to create a single regulatory framework to address this.
Yet the bill introduces confidentiality clauses so dubious as to be regressive. Several researchers and civil society organisations have responded to the draft with submissions showing that in its current form it would continue to enable corrupt, inefficient and ineffective procurement.
It’s not too late to rectify the draft bill so that it supports the public oversight required to achieve the developmental needs of an emerging democracy.
Instead of promoting secrecy and disabling public participation, the bill should enshrine transparency and public oversight.
Weak procurement legislation leaves the public purse exposed
The importance of opening procurement to rigorous public oversight cannot be overstated.
South Africa has made strides in ensuring that its budget processes are transparent. For example, Nigeria’s former Minister of Finance, Ngozi Okonjo-Iweala, recently praised the levels of fiscal transparency achieved by the South African government.
However, budget transparency alone isn’t enough to combat fraud and maladministration. Openness must extend to procurement and spending data. And this must be embedded in mechanisms allowing for rigorous public participation and oversight.
Both Iweala, who has strong expertise in public finance, and the Open Contracting Partnership, whose procurement applications have been used in reform initiatives around the world, contend that the best way to ensure that (emergency) procurement meets its core objectives is to publish all tenders and contracts. South Africa is doing some of this.
But the COVID-19 procurement information that has been published is not comprehensive.
Allegations of graft in COVID-19-related procurement by various government departments, elected representatives and for-profit companies have highlighted the risks of opacity in procurement.
In response to these allegations, President Cyril Ramaphosa signed a proclamation authorising the Special Investigating Unit to investigate all purchases by state institutions of goods and services relating to COVID-19.
This was followed by the requirement for departments to submit comprehensive information on COVID-19 tenders. While publishing this procurement information is an important step, more needs to be done.
A special report by the Auditor-General identified “clear signs of overpricing, unfair processes, potential fraud and supply chain management legislation being sidestepped”. The findings by the Auditor-General indicate weak, unreliable procurement control environments in departments.
The reform of public procurement has the potential to address the poor legislative environment repeatedly flagged by the Auditor-General. But in its current form the draft bill represents a disappointing missed opportunity.
The bill doesn’t commit to the proactive disclosure of procurement information. There is currently no clear provision guiding the disclosure of data and documents at all stages of the contracting process using centralised, interoperable e-platforms. This would ensure whole-cycle monitoring and transparency.
The draft bill and current practices are also light on real-time monitoring arrangements and provisions to stop bad practices as they occur.
Worryingly, the bill contains various references to confidential information, but contains no definition of “confidential information”. This omission is consequential because the confidentiality of procurement information is frequently cited as a ground for refusing to make information public.
Moreover, if a bidder believes that another has submitted fraudulent tender documents and attempts to make this public, then the bidder will be debarred for breaching confidentiality. The effect of this is to penalise whistle-blowing. This contradicts the bill’s stated purpose of fostering transparency.
We therefore conclude that the net effect of the current formulation would be to legislate a regression in transparency. This would enable corrupt, inefficient and ineffective procurement to continue.
Procurement in participatory democracy represents more than mere business. It constitutes the single largest product market. As such, it is central to managing the country’s finances. It is also about transformative development and a stronger social compact.
That’s why ensuring that procurement is effectively monitored by both civil servants and members of the public is vital.
It’s not too late to amend the draft bill.
Bringing about substantive procurement reform will require making decisions that are difficult politically, but that are easy when social justice is at the centre.
South Africa has a real opportunity to put the social contract to work in a sincere way – by bringing social partners in to act against corruption.
There are international examples that illustrate the value of meaningful public participation in the procurement monitoring process.
Public observation of the results of procurement and tracking of the process from beginning to end can ensure a culture of sound financial management is instituted across all departments and entities.
It is time that the societal benefits of an efficient, effective spend of public finances are realised. This requires opening procurement to rigorous public participation and oversight.