Stopping the public procurement rot: don't blame the mouse, blame the hole in the wall!

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Parliament-100.jpgThe chickens have come home to roost for public procurement in South Africa − and what a lot of chickens there are! All indications are that public procurement has been beset by peddlers of influence, venal vendors, rogue executives and delinquent boards. Without a doubt, those responsible must be held accountable for their ruinous conduct. But, more importantly, state-owned companies (SOCs) must extract every bit of learning that they can from this calamitous experience. There is a Talmudic saying: "don't blame the mouse, blame the hole in the wall". This aphorism teaches us to not only focus on the transgressors, but to identify systemic weaknesses that have allowed transgressions to occur.

Peter Volmink, a procurement lawyer employed by a major public entity and chair of a special interest group on procurement law, highlights six areas that require focused attention.

Join us at Smart Procurement World Western Cape, where will unpack the lessons procurement has learnt so far form the State Capture Enquiry. What should procurement do NOW to get its constitutional mandate and operate free from external influences? How can procurement be positioned to protect and strengthen core institutions from in South Africa? Join us for this keynote address on 9 April 2019.

1. Trouble at the top

The most spectacular governance breaches are committed by individuals at the top levels of SOCs. Yet, in the main, we tend to throw the book at junior employees for relatively minor transgressions. It is at the top level that executives and board members tend to pay lip service to governance, but play fast and loose with procurement rules as it suits them. It is precisely this 'cowboy' culture that has landed SOCs in the mess that they are in. There is little point to fiddling with 'control improvements' directed at supply chain officials when we have not addressed the trouble at the top.

2. Corporate culture

The flip-side of this 'cowboy' culture is the compliant attitude that exists among senior managers. Managers are tasked with implementing decisions taken at the top level and are not known to buck the system. After all, their upward mobility depends on how 'co-operative' they are perceived to be. Yet, when top-level executives and board members decide to 'move on' (usually a euphemism for getting fired!), it is left to managers to deal with the fall-out. Managers must, therefore, be empowered to uphold procurement and governance norms in all transactions, even if it means acting contrary to the wishes of errant board or Exco members.

3. The appointment of boards

Two issues must be considered here. Firstly, the appointment of SOC boards must follow a public and transparent process. It is no longer acceptable to have SOC boards appointed in secret to do a minister's bidding. Political interference in the functioning of a board is not made more acceptable by virtue of the fact that the appointing minister happens to be one of the 'good guys'. SOCs must stand vigilant against the danger of overreach on the part of the executive, however well-intentioned. To adapt the words of a former Constitutional Court judge, our laws should not only protect us from kleptocrats and looters, our laws should also protect us from ourselves.

Secondly, the precise role of boards in relation to public procurement must be clarified. At present, SOC boards are half-pregnant. Given the Presidential announcement during the last SONA, boards are not supposed to be involved in making procurement decisions but must perform an oversight function. Yet, their new 'oversight' role is not well understood. The lack of guidance from the shareholding ministry on the issue has not helped much either. Boards must be made to understand both the extent and the limits of their oversight powers in relation to public procurement, so that they do not overstep their boundaries.

4. Regulatory framework

South Africa cannot complain about a lack of rules and regulations governing public procurement. But there are at least two problems with the regulatory framework. Firstly, it is highly fragmented and, for the most part, poorly drafted. Secondly, it has done little to stop the scourge of corruption. In fact, corruption seems to thrive quite effortlessly alongside the elaborate procurement rules that are currently in place. This paradox must be analysed and understood, so that we do not make the mistake of simply throwing more regulations at our problems. A regulatory overhaul is sorely needed, but it is more important to capacitate the enforcement functions within SOCs to ensure full compliance with regulatory requirements.

5. Empowerment

Our recent past has taught us that noble ideals, such as empowerment and transformation, are all too often hijacked by villainous scoundrels masquerading as 'radicals'. But this deception should not detract from the importance of genuine empowerment initiatives. Empowerment must remain a key objective of public procurement. An affirmative procurement programme, supported by enabling legislation and implemented within the discipline of the Constitution, is pivotal to reshaping our society.

6. Compliance and efficiency

In our quest to ensure greater compliance in public procurement, we should not forget about the importance of achieving the most economically-efficient outcomes, such as best price and quality. A procurement system that places all the emphasis on compliance, but which yields sub-optimal economic outcomes, will ultimately destroy economic value and undermine the credibility of the system. We, therefore, must find a proper balance between compliance and economic efficiency.

There are many supply chain practitioners across all of the SOCs who want to ensure that the current crisis does not go to waste. Perhaps it is time for their collective voice to be heard.

This article was originally published on News24.

Join us at Smart Procurement World Western Cape, where will unpack the lessons procurement has learnt so far form the State Capture Enquiry. What should procurement do NOW to get its constitutional mandate and operate free from external influences? How can procurement be positioned to protect and strengthen core institutions from in South Africa? Join us for this keynote address on 9 April 2019.

[ A word from our Editorial Board...

Kamogelo Mampane is the CEO of TK Global Experts, Chairman of the Chartered Institute of Procurement & Supply (Gauteng) and a SAPICS Board Member.

In recent times, we have seen a renewed focus on reviewing, cleaning-up and refocusing on governance and/or the lack of it. The governance collapse of both the private and public sectors left no industry unharmed and, in the main, supply chain and procurement are targeted for said collapse.

Peter Volmink's above article seeks to create a platform for procurement professionals, from the private to the public sector, to reflect and refocus their activities on what really matters. ]

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