National Treasury briefing on the work of the Office of the Chief Procurement Officer

Meeting report

The Chairperson said that she was on her way to a hospital, so the chief whip would take over the meeting in her absence.

Mr F Jacobs (ANC) took over the Chairpersonship of the meeting.

Presentation by Office of the Chief Procurement Officer

Ms Basani Duiker, Chief Director: Supply Chain Management (SCM) Governance, Monitoring & Compliance, Office of the Chief Procurement Officer (OCPO), described the strategic objectives of the Office. These included:

to improve the performance and efficiency of the state procurement system;
to develop and implement a procurement regulatory environment to improve compliance;
to leverage government spending for economic and social development;
to modernise state procurement through using information technology;
to improve the performance of state procurement in respect of achieving ‘value for money’ and service delivery;
to improve governance and increase accountability and transparency; and
to improve the capability and performance of procurement officials.

She then addressed the structure of the OCPO and the SCM legislative framework. The Office had been set up as a distinct division within the National Treasury, headed by the Chief Procurement Officer (CPO), and was organised into six units. She spoke about demand management and acquisition challenges and rounded off by referring to trends, observations, and key issues for the Office, including operational challenges.

She said the trends that had been picked up included:

Increased departures from the competitive bidding process;
Continuous modification of contracts to keep the same service providers;
Increasing audit disputes;
Poor procurement planning;
Poor implementation of projects, leading either to contract expansion or to single source deviations;
Poor governance structures;
Non- implementation of consequence management on officials who cause irregular expenditure;
Poor service delivery; and
Less participation by small businesses and designated groups such as women, youth and people with disabilities.

Key issues for the OCPO were the Public Procurement Bill; strengthening the capacity of the Office; capacitating the Office to be able to implement and enforce the Public Procurement Bill; procurement transparency; procurement governance oversight; effective analysis of procurement data; curbing corruption; SCM automation and modernisation; abuse of public procurement processes; and public discontent.

The operational challenges were inadequate monitoring because of the manual processing of requests/applications; delays in processing requests because of insufficient human resources (HR) capacity; applications not being fully completed; the inability to design and implement measures to minimise non-compliance and abuse of the SCM system; and inappropriate use and implementation of emergency procurement procedures leading to increasing investigations.

Discussion

Mr H Kruger (DA) said it was a shock to see so many things going wrong in public procurement at state entities. Small and micro businesses were getting the bad end of the business because of the red tape involved in getting a tender from state entities. Corruption was the second issue because if one did not have money to "buy off" an official, one's chance was less than a person who had money to bribe officials. What was the Office doing about red tape, as the process had to be simplified? What was being done regarding consequences for corruption, and what processes should be implemented to get rid of corruption or corrupt officials?

Mr J de Villiers (DA) said that state spending was R1 trillion per annum. A recent court case involving Agribusiness ruled that section 3 of the most recent tender procurement guidelines was unconstitutional. Yet, Treasury asked for further clarity on the ruling, and was still carrying on with tenders even though the judgment declared on the unconstitutionality of section 3. What was the Office’s view of this, as this meant other tenderers could challenge winning bidders in court, which would have a big impact on and destroy small businesses? He said getting a lease agreement via SCM processes was difficult, as this was not how the property market operated. What was being done to stop government workers and officials benefiting from doing business with the state through the illegal award of tenders to family and friends?

Ms B Mathulelwa (EFF) said small, medium and micro enterprises (SMMEs) were victimised when it came to tenders. She said 80% of tenders were awarded based on corrupt activities and gave the example of building a sports centre in Matatiele. She said the tender system was serving only the corrupt.

Mr D Mthenjane (EFF) said the common enemy was fraud in the tender system, and steps needed to be taken by government to ensure that people were held accountable.

The Acting Chairperson said the reason for meeting with the Office was to understand its role, which was to help the Committee improve the developmental impact of the state’s R1 trillion spending, as small businesses had to benefit from the state’s spending. What steps were being taken by the Office to meet these developmental goals? Could the Office provide examples of the norms and standards mentioned in the presentation? Did the Office have transversal procurement items? How many SMMEs had benefited from state spending in the previous year? What needed to be done about the self-interest and greed of officials and politicians involved in benefiting from state spending? He disagreed with Mr De Villiers' point on the Agribusiness court case. What was the plan to modernise and automate information communication technology (ICT) and e-governance systems to make them more accessible to small businesses? One of the motivations for having the Office was to have a modernised and centralised procurement. However, the e-tender system was fairly subdued and bid documents were still being sold on private websites, which was much better than the e-tender system. How would this be countered? Another issue was the cancellation of bids. The Office was the protector of the public purse, and it needed to be protected.

Mr H April (ANC) said that small businesses wasted money when tenders were pre-assigned. He wanted to know more about the security against hacking of the cybersecurity system. He said the tender system was complex and cumbersome. What did the Office do to ensure that new enterprises got a break into the market and that tenders were not issued to the same people over and over again? How did the Office deal with big business bullies who, for example, used fronting? He said it would be unfair for landlords to be treated differently and that the Agribusiness court case issue was sub judice and should be held in abeyance. 

Mr Kruger said government’s public procurement was spending taxpayers’ money. Was there any system to ensure that value for money was being obtained? 

Mr De Villiers said that he and the DA were not trying to uphold white privilege and wanted to see the empowerment of people who were disempowered. Current procurement was being used under the guise of Black Economic Empowerment (BEE) to enrich an elite group of politically connected individuals already empowered. He disagreed with Mr April that the court case matter was sub judice. Treasury was not contesting the court’s ruling but asked for more clarity on the ruling, not the outcome.

The Acting Chairperson agreed that empowerment should be broad-based. He said there was a trust deficit, with South Africans not trusting officials and public representatives, so the Committee wanted to restore transparency, integrity and confidence in procurement processes. The Constitutional Court also had to subscribe to a non-discriminatory approach. He asked the Office what their plan was to address their concerns, trends and observations. Was there a blacklist of transgressors? Were there lifestyle audits of SCM officials? Did the Office have the power to subpoena individuals? What interventions were there for price gouging or collusion?

Mr April said South Africa had one of the highest small business mortality rates globally because of barriers to entry. What was the Office doing about that? State procurement was supposed to be used to breach that gap, but the state did not compel the private sector to partner or buy from SMMEs and cooperatives. He did not know of a single instance where a state official who had manipulated the system had been fired. What consequence management systems were in place?   

Ms Mathulelwa said tender winners were sometimes people without skills but had false documents. The wrong people, without skills, were being awarded tenders.

OCPO's response

Ms Duiker said she could not answer policy or legal questions. She said the court judgment was on preferential procurement regulations, which was declared invalid. This judgment needed to be unpacked because it affected government policy which sought to advantage designated groups.

On implementing tenders after the court had ruled, she said the government had to continue to deliver services, but it was a fine balance between legislation and compliance while wanting value for money, competitiveness and transformation. It was not only up to the Office or Treasury, but rather a coordinated government attempt and the laws dealing with corruption had to be strengthened.

There were processes where the OCPO engaged with law enforcement on investigations and the vetting of officials. It was looking forward to the Procurement Bill consolidating a number of procurement issues. She said further written questions could be forwarded to the Office.

Mr Tumelo Ntlaba, Acting Chief Director: SCM ICT, OCPO, spoke to matters concerning red tape. He said the Central Supplier Database (CSD) was to assist small businesses to access and do business more easily and simplify tax compliance. Automating the majority of processes would help eliminate human interactions that could impact tender processes. In the coming months, the e-tender portal, which until now supplied only the tender documents, would be able to accept SMME responses to the tenders online, and therefore the online evaluation of the tenders, which would improve transparency.

On whether there was data available on how government money was spent, he said there was a breakdown of the size and profile of enterprises awarded tenders. In addition, all contracts, deviations and awards would be made public.

Mr April said there was a directive relating to the 90-day payment of invoices and asked if the Office could clarify this.

Ms Duiker said she was only aware of the 30-day directive but that, in any case, this was not within the Office’s ambit. That responsibility lay with the Office of the Accountant General. 

Adoption of minutes

The minutes of 18 May were adopted.

The meeting was adjourned.