Public sector procurement is infuriating. If you are a well-intentioned and competent civil servant, it makes your life impossible, tying you up in paperwork and committees and adjudication processes so elaborate that you can’t do the job you want to do. By the time you get through it, the MRI machine you wanted for that hospital is redundant technology and costs 30% more than you could have got it for had you just bought it from the cheapest supplier when you wanted it.
Of course, not all civil servants are well-intentioned or competent. So the system is designed to deal with the lowest common denominator. That is proving hard to change. The latest legislative effort, the Public Procurement Act, has been struck down by the Constitutional Court for insufficient public consultation. That is a good thing — it was a bad law, and now there is an opportunity to fix it.
The challenge is that clean procurement at a good price is not the only thing that matters. The R1-trillion (about 12% of GDP) that the government spends through procurement every year has an enormous economic impact. It creates opportunities for many businesses and is an important lever for the state to influence economic development, including dealing with the legacy of apartheid.
It’s obviously also enormously attractive to criminals who have huge incentives to infiltrate procurement decision-making and direct flows towards their own interests to extract rents. Corruption costs money — bribes, extortion, shopping trips and overseas holidays don’t come for free — but if it can be done at a low enough risk-adjusted price, it is profitable.
So a good procurement system must kill an awful lot of birds with one stone. Enable the effective elements of the public service to efficiently procure goods and services that will deliver great value to the public. Drive economic development to meet policy goals. And stop the criminals and the incompetent from stealing or wasting public money.
Unfortunately, we have not got anything of the sort, and the Public Procurement Act might well have made it worse.
The Zuma years, as the Zondo commission laid bare, induced unprecedented abuse of public procurement. The temptation is to err towards being risk averse. Indeed, the procurement system is designed more to prevent bad practices than to enable the well-intentioned to be effective. That is the cold logic of public service — you get into far more trouble for something going wrong than you get praised for something going right. Even though that risk aversion is clear, corruption still thrives.
The Constitutional Court declared the act invalid, though it had not yet come into force. The decision did not deal with the substantive flaws in the legislation, of which there are many. However, the court, in assessing whether changes made during the process of enacting the law were material, does point to some highly questionable elements in the legislation, noting that the more contentious a provision is, the more important public consultation becomes.
The law was rushed, pushed through before the 2024 election presumably to demonstrate delivery of a sort. The Constitutional Court sets out the applicants’ cases, which show how material sections of the law were changed at the last minute, almost on the fly. The court found that consultation was most needed on chapter 4 of the act, which deals with preferential procurement, including set-asides and pre-qualification requirements for potential suppliers.
These were substantially amended after the public consultation process with lots of additional rules that would push procurement flows to particular kinds of businesses. So, if the effort to rush through this legislation was due to electioneering expediency, which constituency was the government trying to appeal to? The only conclusion is that it was influenced by those aiming to extract rents from public procurement, a constituency that needed to be kept onside before an election.
The whole process does not reflect well on the ANC, parliament or the National Treasury. Knowing that the Treasury is highly capable of writing good laws, I’m tempted to conclude that it cynically went along with the charade, under political pressure, knowing that the act would eventually be kicked out by the court. Now that this has happened, there is an opportunity for a reset, to engage in a serious process of developing a procurement law that delivers on the national interest. It can do so without kowtowing to special interest groups that want to tilt the scales to enable their maximum rent extraction.
The Zondo commission produced extensive recommendations on how procurement could be cleaned up. While these were referred to in the Constitutional Court proceedings, and the act was described as having responded to these when it was drafted, it falls short on many of those recommendations. Even during the drafting, the National Anti-Corruption Advisory Council warned that the bill had not properly addressed the commission’s recommendations and could leave significant corruption risks. Procurement needs to be clean and efficient and contribute to the development aims of the country. Government policy should use procurement to drive transformation and the development of small businesses, and that is eminently feasible while ensuring that the government still gets value for money.
I know it’s hard, but we have a chance now to deliver genuinely good procurement rules that best satisfy the competing demands they face.
Theobald is chair and founder of research-led consulting firm Krutham
