Budget 2013 Procurement and combating corruption

Posted 28 February 2013 Written by Ciaran Ryan

The 2013 budget is about delivering "value for money" said finance minister Pravin Gordhan. That means getting serious about stamping out corruption.


Lawson Naidoo of the Council for the Advancement of the South African Constitution last year estimated that tender corruption could cost up to 20% of the country’s GDP. To put that in numbers, 20% of this year’s expected GDP of R3,5 trillion is R700 billion. That’s what Naidoo is suggesting is lost to corruption.


Naidoo’s numbers may be suspect, but even if it is a quarter of that, it cries out for the kind of urgent action that Gordhan promised to bring to the problem in his Budget speech yesterday.


"Last year I said to this House that we will continually endeavour to increase the value which government receives for the money it spends. Let me be frank. This is a difficult task with too many points of resistance." He said.


Part of the problem is that procurement transactions take place at too many localities and the contracts are short term, which leaves plenty scope for abuse. "While our ablest civil servants have had great difficulty in optimising procurement, it has yielded rich pickings for those who seek to exploit it. There are also too many people who have a stake in keeping the system the way it is," said Gordhan.


The National Treasury is setting up a post of Chief Procurement Office (CPO), backed by a project team from state agencies. The private sector has identified four main streams of work, involving immediate remedial actions, improving the current system, standardising the defence, public order and safety procurement of critical items across all government and the long-term modernisation of the entire system.


Among the first initiatives of the CPO will be to enhance the existing system of price referencing. This will set fair value prices for certain goods and services.


Secondly, it will pilot procurement transformation programmes in the Departments of Health and Public Works, nationally and in the provinces.


National Treasury is currently scrutinising 76 business entities with contracts worth R8.4 billion which it believes have infringed procurement rules, while SARS is currently auditing more than 300 business entities and scrutinising another 700 entities. The value of these contracts is estimated at over R10 billion. So far 216 cases have been finalised resulting in assessments amounting to over R480 million being raised. The Financial Intelligence Centre has referred over R6.5 billion for investigation linked to corrupt activities.


Gordhan says curbs should be placed on officials doing business with government, and the Public Finance Management Act is to be aligned with the Public Service Act as part of the anti-corruption drive.


The National Treasury is contemplating adopting international initiatives to oversee the accounts of what it calls "politically exposed persons" – public representatives and senior officials.


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