Bill tabled to curb officials’ state business deals

Posted 17 July 2013 Written by Linda Ensor
Category Business

A DRAFT bill has been tabled in Parliament which aims to prohibit state employees and their families from directly or indirectly holding more than a 5% interest in any entity that does business with the government unless prior approval is obtained from the relevant minister, according to an article in Business Day.

However, the effectiveness of the draft Business Interests of Government Employees Bill, which is aimed at stamping out corruption in government, will be limited by the fact that it will not be retrospectively enforced and will therefore not apply to contracts already under way.

This appears to be inevitable as retrospective legislation is frowned upon and can in some circumstances be unconstitutional.

Of concern to business might be the fact that contracts found to involve government employees, without this being declared up front, will be cancelled and subject to a claim for damages.

Public Service and Administration Minister Lindiwe Sisulu announced earlier this year that the bill was just one of a number of measures planned to tackle corruption in government, which some analysts believe has become endemic.

The memorandum of the bill points to concern that "a large proportion of corruption detected in government results out of public servants and politicians starting or becoming major shareholders in companies that do business with government".

It notes that the delivery of quality services to the public has been undermined by civil servants "inappropriately benefiting from government tenders".

The memorandum refers to a 2011-12 auditor-general’s report that said the Free State government had awarded 50% of its contracts to politicians and their families. It also cites other examples such as the departments of health and basic education where thousands of employees were engaged in business with the state.

The bill will require all entities wishing to do business with the government to submit an affidavit that discloses the business interest that a government employee or a family member has in the entity. Failure to comply will mean the application or tender for a government contract will be rejected.

Where a contract has already been awarded, the failure to comply will result in the cancellation of the contract and a claim for damages.

Employees will be obliged to disclose to the government any business interest they or members of their families have in an entity conducting business with the government, at prescribed intervals.

This obligation will come into force within three months of the promulgation of the act and failure to comply will result in disciplinary action.

Departments will have to keep a database of all the business interests disclosed by their employees.

The bill will prohibit employees individually or together with family members, partners, business associates or other employees from directly or indirectly owning or controlling more than 5% of the shares, stock, membership or other interest of that entity.

A minister may waive the 5% limitation after considering an application by an employee.

Consideration would have to be given to the nature of the goods or services to be supplied; the nature and extent of the business interest of the employee; any possible adverse consequences for the state or the employee if the application were to be refused; and the constitution and procurement laws and policy.

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