Khulekani Mathe, CEO-designate of the country’s apex business organisation, Business Unity South Africa (Busa), says a more efficient, effective and transparent public procurement system is imperative for economic growth and for society.
“It is critical for business, society and the economy. It is something we should not compromise on ... [It] is not just essential for us as business, it’s absolutely critical for everyone in the country because it’s taxpayers’ money that is used in public procurement.”
According to a report by the Organisation for Economic Co-operation and Development (OECD) published this week, South Africa spends 15% of GDP on public procurement compared with an average of 13% for OECD countries — but it is getting far less value for that money in terms of public services and infrastructure.
The OECD study, commissioned by the National Treasury, flagged the public procurement system as inconsistent, inefficient, lacking in transparency and open to corruption.
Mathe says this shouldn’t come as news to anyone who has been paying attention.
He points out that former chief justice Raymond Zondo in his state capture report more than two years ago made detailed recommendations for reforms to the public procurement system, which he found was “clearly complicit” in the “grand scale corruption” of state capture.
“So this is something that we have known for a while now. The OECD report helps us because it is by an external, specialised body that has done similar studies in other countries. When it finds that comparatively we’re doing poorly in our public procurement system it is good enough evidence for us to do something about it.”
When it finds that comparatively we’re doing poorly in our public procurement system it is good enough evidence for us to do something about it
The government’s response to the Zondo commission’s recommendations has been slow and inadequate, he says.
Eventually it came in the form of a new Public Procurement Act signed by President Cyril Ramaphosa in July but not yet implemented. It has been criticised for focusing too much on preferential procurement from black-owned businesses and set-asides for disadvantaged groups, and not enough on making procurement processes more efficient and less corrupt.
Although Busa was involved in the legislative process at the National Economic Development & Labour Council (Nedlac), Mathe agrees with the criticisms.
“We made submissions, but it’s in the nature of these things that you win some you lose some. The main point is that more work needs to be done to give effect to the Zondo commission’s recommendation about strengthening our procurement system, and now to implement the recommendations of the OECD. We definitely need to go further.”
He says because of corruption in the current system — which awards tenders to businesses in a way that is not competitive, “in other words not because they are the best to provide the service” — those operating in an ethical way are not getting business.
“Legal aspects of the system such as set-aside and preferential procurement have not been without cost to our society because they may give preference to unqualified, from a technical point of view, bidders.”
The award of tenders to businesses that have little or no capacity to deliver services has a heavy social cost in terms of quality of life, he says.
The fact that the Treasury accepts that the new Public Procurement Act does not go far enough and that further work needs to be done to strengthen it, is “very encouraging”, not least “because it shows they are taking the advice they paid for, and are saying, ‘let’s do something about it’.”
Mathe says Busa “fully supports” the need for a single, independent anticorruption agency with a mandate and powers to tackle corruption up to the highest levels as recommended by the OECD and, as he points out, by Zondo, “who found that malfeasance happened that could have been prevented had there been such a body”.
The anticorruption agency would need to have full powers to act against corruption at the highest levels, or its independence would “count for very little”.
“The independence of institutions only means something if they’re able to do something with it.”
He cites as an example the office of the auditor-general, “an independent body which can speak truth to power because it is completely protected from political interference”.
“That’s the kind of independence you want. Independence without power would be useless. Only because of extra powers given to the AG in an amendment to the Public Audit Act are we beginning to see some improvements in the conduct of public officials tasked with the management of public finances.”
Although implementation of the Zondo recommendations is “not happening fast enough”, the strengthening of the AG’s powers along with the Treasury’s support for the OECD recommendations about the public procurement system and a separate, independent anticorruption agency are encouraging signs, he says.
Asked if the voice of business is being heard loudly enough by the government to move the needle in a sufficiently urgent and tangible way, Mathe says: “We accept that we are not the only stakeholder in the country. I would argue that we are by far the most important stakeholder given the role we play in the economy, but all views need to be given a hearing.”
Busa has access to decisionmakers, he says. If the organisation requests a meeting with the president it gets it, and it meets with ministers periodically to put its case.
“We could wish for better results, but in the nature of things you win some, you lose some. But we’ll continue fighting and agitating for things we believe are good for society and good for business.”
He says business would like to have a bigger presence on the Presidential Economic Advisory Council.
“Of course, we would like more business people in the council who will bring the perspective of business, although we accept that the president has the power to make those decisions.”
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