Conversations About Corruption I - The National Anti-Corruption Strategy And Procurement Reform

The here and now

Where were you on 14 February 2018? South Africans will remember – many were rooted in front of screens of televisions or streaming devices, watching President Jacob Zuma resign. In a sense, this act divided recent South African history into two periods: the “Zuma years” and “everything after Zuma”.

Few would refute that the hot issue of the Zuma years was corruption. While corruption existed before Mr Zuma’s ascension to the presidency, it seemed that during his terms the country became mired in it. It permeated throughout all levels in society: from lower level opportunistic deals taking place in local government, road traffic authorities, the police, and offices administering housing and social services, to corruption writ large in the form of state capture. There was a perception that the hard work of bringing about a peaceful transition to democracy was being undone by individuals seeking to abuse positions of power for their own material benefit.

The threat to South Africa’s constitutional democracy gave rise to renewed efforts from several non-governmental organisations (NGOs) dedicated to fighting corruption and abuse of state resources. Extensive litigation was launched regarding accountability and the strengthening of democratic institutions to withstand corrupt influences. Research and academic works were produced considering appropriate mechanisms to address corruption. People were inspired to mobilise and protest. There was a concerted effort by various stakeholders to chip away at the structures enabling corruption in public institutions.

The way forward

Those stakeholders - intimately acquainted with the struggle against corruption in public institutions as they are - knew better than to regard the events of 14 February 2018 as a panacea. Rather, that day marked the start of a period of opportunity. The hope is that the Ramaphosa presidency heralds the commencement of bona fide investigations and that information will be made available to the public, criminal charges will be pursued where appropriate, and public funds lost to corruption will be recovered. The ultimate goal is for a public service that uses public funds in an effective manner to serve the people.

But how to reach that goal? Over the past few months, stakeholders have been coming together to find answers to that question. This brief serves to collect some of the ideas shared at these gatherings in an attempt to plot the key points in the roadmap in the battle against corruption. These gatherings attended by the HSF were as follows:

• The Gauteng public engagement workshop held on 5 June 2018 with regard to the development of the National Anti-Corruption Strategy (NACS);
• A roundtable discussion on professionalising public procurement hosted by the Public Affairs Research Institute (PARI) on 12 June 2018;
• The launch of a special interest group on public procurement law by the Administrative Justice Association of South Africa (AdJASA) which took place on 18 June 2018;
• A workshop held on 21 June 2018 by the Institute for Security Studies (ISS) regarding the strengthening of civil society’s role in promoting government transparency and accountability for reducing corruption;
• A discussion hosted by PARI concerning the role of civil society in deepening the fight against state capture on 26 June 2018; and
• A forum entitled “Civil Society III” convened by Corruption Free Africa held at the Pan African Parliament on 5 and 6 July 2018.

Naturally, there was a degree of overlap in these discussions. Rather than attempting to provide a detailed record of each event, this brief will set out insights from these various events will be collected under themes which, taken together, will provide an overview of important areas of focus going forward. In this Part I of a two-part series, NACS and procurement reform will be examined.

The National Anti-Corruption Strategy

Is there a comprehensive state plan to deal with corruption? As part of the Medium Term Strategic Framework 2014 – 2019, the South African government appointed a Steering Committee to develop the NACS with the aim of

“developing a set of shared commitments across sectors, to support collaboration within and between sectors, and to direct renewed energy towards the goal of reducing corruption and building an ethical society”.

A discussion document was published in 2016, setting out proposals for the NACS[i]. The document outlined objectives, described the conceptual framework, and most importantly, set out nine mutually supportive “strategic pillars and programmes” that would be used as the foundation of the NACS.

The purpose of the public engagement workshop was to obtain additional inputs from stakeholders and to raise awareness of the NACS. It was attended by a broad spectrum of stakeholders, including representatives from local, provincial, and national government; members of civil society; representatives of the Public Service Commission (PSC); civil servants; members of the academy; and others.

It is clear that much work had gone into developing the discussion document, and the Steering Committee was making every effort to ensure that their strategy had “buy-in” from stakeholders. The “nine pillars” approach is indeed helpful in setting out a broad indication of what an anti-corruption strategy should entail, and the attempt to concretise a plan for the future is laudable. The nine-pillar approach does not, however, address the fundamental question of who is tasked with carrying out the action steps listed under each “pillar”, how that person will acquire or be provided with the resources to do so, and who is responsible for monitoring compliance with the strategy. Responsibility is vaguely apportioned to “government, business and civil society sectors” without any degree of particularity. It is also not clear whether the NACS will have any binding force on stakeholders. Hopefully, these concerns will be addressed in the process of developing the final strategy.

The public consultation workshop served as a forum to hear about participants’ experiences with corruption and what they are doing to fight it. The following questions were put up as a way to frame the discussion:

• Who are the people who are engaged in corrupt activities?
• What are their motivations?
• What are their enabling factors? What are the deterring factors?
• Should dealing with corruption be incorporated into disciplinary process?
• What factors are there to encourage people to blow the whistle?
• What mechanisms are in place to ensure that accountability moves upwards?

These wide ranging yet penetrating questions were a useful point of departure for stakeholders and should continue to be considered in dialogue about corruption. In the course of discussion, participants proffered their own answers to the questions as informed by their experiences. Some suggested a focus on local government, where corruption proliferates unchecked (and over which the PSC has no jurisdiction). Others pointed to low morale in the public sector as a factor that influences people towards corruption (or away from reporting it once discovered). The idea of an open tender system was pitched. At times, the conversation moved to broader systemic issues, such as the reform of the electoral system to allow for more accountability through voting. On the other end of the spectrum, practical issues such as the efficacy of government corruption hotlines was debated. In addition, the idea of concentrating anti-corruption efforts in a single institution was mooted. When prompted to provide a “wish list” for fighting corruption, the following suggestions were made:

• Legislation regarding illicit financial flows;
• Enforcement of legislation currently in place to fight corruption;
• Transparency in procurement; and.
• The commencement of the Public Administration Management Act 11 of 2014

Given the wealth of information shared, it is clear that the public consultation workshop was an invaluable step in developing the NACS. It is unclear, however, when this process is expected to be completed. The workshop, which took place in June 2018, was scheduled to have happened in January 2017 according to a “roadmap” setting out the timeline for the process.

The NACS will, on the whole, probably be of benefit. However, at the point where there is renewed impetus to root out corruption, it is apparent that the process is woefully overdue. It’s unclear whether the strategy will be finalised by the end of the Commission of Inquiry into State Capture headed by Deputy Chief Justice Raymond Zondo (Zondo Commission). And even if it is, revelations from the Zondo Commission may have shifted the goal posts by that time. NGOs dedicated to fighting corruption have to move quickly to keep up with developments. Will this behemoth of a strategy be nimble and responsive when it matters? Time will tell.

For now, the NACS (and its development process, including public consultation) can serve at best as a lightning rod for issues, opening up space for sharing of ideas and experience. And maybe, once finalised, it can serve as a coordinating mechanism. Until then, and while the process plods along, other stakeholders will continue the relentless task of tackling corruption at all levels.

The need for innovation in public procurement

It is well-known that public procurement is rife with corruption. This awareness can be attributed to the extensive media coverage given to cases of tender fraud and irregularity. Another factor that no doubt plays into the public consciousness is the starkness of the figures involved laid out in black and white - including the stunning R10 billion contract awarded to Cash Paymaster Services (Pty) Ltd by the South African Social Security Agency, subsequently deemed invalid by the Constitutional Court[ii]. Few would argue that public procurement in South Africa is ripe for reform. The scale of the problem necessitates fresh, innovative approaches to public procurement.

Mr Kenneth Brown, the former Chief Procurement Officer, highlighted some of the challenges he experienced during his tenure[iii]. Mr Brown was critical of the current legislative framework concerning procurement, including the oversight role afforded to Treasury to investigate instances of wrongdoing. This ineffective system should be modified to provide for the inclusion of clauses regarding accountability in supply chain management in performance contracts.

Other reforms proposed by Mr Brown include:

• A system of registration for officials that would facilitate their disbarment from working in procurement if found to have acted with impropriety. This guards against officials being moved between departments once adverse findings are made against them.
• Ensuring that people in procurement are properly skilled. Currently, public servants are process-orientated, which lends itself to a “tick-box” approach to procurement. They need to be upskilled to be agile in confronting issues in procurement as they arise.
• Systems need to be modernised. This includes an e-commerce system for routine goods and services.
• There needs to be “strategic sourcing” when creating bids. This means that before procurement goes out to tender, pre-work – such as research on market-related prices for goods and services – needs to be done.

Mr SollySegoa gave helpful insights from the office of the Auditor General[iv]. He put up graphs showing that irregular expenditure has been increasing since 2008, pointing out how supply chain management failures arise from inappropriate planning, deviation from intended results, overcharging, losses, and fruitless and wasteful expenditure. The shortcomings among supply chain managers are severe: they are failing to meet obligations such as obtaining three written quotations, inviting competitive bidding, and following the preferential point system. How does this recalcitrance come about? His view is that the root causes are unfilled vacancies and instability in leadership, inadequate skills, political infighting (particularly in local government) and the actions (or inconsistent actions) of leadership.

But all is not lost: he pointed to the proposed amendment to the Public Audit Act[v] which has been passed by both houses of Parliament and now awaits presidential assent. This amendment gives additional powers to the Auditor-General and makes the recommendations from that office binding. Other promising changes include the granting of certain powers relating to investigations, and the power to issue a “certificate of debt” against an accounting officer or accounting authority who fails to implement remedial action prescribed by the Auditor-General following an investigation. It is hoped that by enhancing the powers of this key office, irregular expenditure will be curtailed.

Another piece of proposed legislation that promises to bring about sweeping changes to public procurement is the Public Procurement Bill. Mr Brown discussed how the process for the development of the Bill was completed in June 2016, but it was shelved shortly thereafter. It gave extraordinary powers to the Chief Procurement Officer, such as disbarring persons found to have committed wrongdoing from doing business with the state. It also gave certain powers of investigation. In 2017, the then-Minister of Finance Mr MalusiGigaba stated that key objectives of the draft bill included providing for supplier development for procurement, providing for targeting designated groups and breaking down barriers to entry by reducing the administrative burden on prospective suppliers.[vi]

Rather unusually, the Bill has not been made public. Professor Geo Quinot from the University of Stellenbosch stated that no green paper or white paper was issued in relation to this Bill[vii]. Therefore, the public was not afforded any opportunity to analyse the Bill or the framework within which it was developed. This raises questions as to what closed-door machinations were behind the Bill and the subsequent decision not to proceed with its passage through Parliament. If the Bill is indeed as it has been described, then it is sorely needed to address some of the deeply-rooted problems in procurement. The public should – at the very least – be given reasons why its progress was stalled.

Prof Quinot went on to detail his expectations for the Procurement Bill. These are:

• Statutory consolidation, to address the highly fragmented nature of South African procurement law. Prof Quinot noted that there are presently at least twenty primary, specific pieces of legislation concerning procurement. There is also subordinate legislation that applies. However, the “meat” of the rules regarding procurement is to be found in each entity’s Supply Chain Management (SCM) policy. There are also problems within industry-specific standards. An example of this is the construction industry, where standards for infrastructure procurement, Construction Industry Development Board regulations and the Preferential Procurement Regulations of 2017 apply, without a clear hierarchy between them. The inherent complexities in consolidation must be drawn to Parliament’s attention before embarking on statutory reform in this regard.
• Institutional arrangements, such as considering whether the retention of the Office of the Chief Procurement Officer is necessary or desirable. Prof Quinot’s view is that this office has not achieved regulatory success and its placement in Treasury is problematic from the perspective of accountability. Municipalities present unique challenges in that national government has no power to make rules regarding the conduct of local government, which is subject to the Municipal Finance Management Act[viii].
• Preference. Prof Quinot suggests that the Preferential Procurement Policy Framework Act[ix] is too rigid, and the preference system should be replaced with new regulations. These regulations should allow for flexibility in the rules and set categories for preferences.
• Remedies. Prof Quinot characterises the current remedies regime as “blunt and unsophisticated”, with an over-reliance on judicial review. A mechanism to deal with disputes before parties turn to judicial review should be investigated. A remedy in the form of compensation for an unsuccessful bidder together with the protection of the contract needs to be given serious consideration.

The usage of transversal contracts[x] and “piggy-backing”[xi] in procurement is another contested issue. It was pointed out that the gold standard in procurement is to follow the prescribed process. These types of contracts offer means to circumvent that process. Transversal contracts and piggy-backing have the potential to undermine competition by excluding small companies, but the flipside of this is that including small companies can undermine cost-effectiveness. A coherent policy that balances these concerns and is strictly adhered to is required.

Conclusion

It is clear that working to end corruption requires a multi-pronged approach. Reform of procurement processes is one crucial aspect. As became evident from the various discussions attended, there are many ideas on how to do this. But the failure of a major intervention in the form of the Public Procurement Bill shows a worrying lack of political will.

On the other hand, government support is not lacking for the NACS, but there is no guarantee that the project will affect levels of corruption.

Part II of this brief series will go on to consider the role of technology, education, and the public in the fight against corruption. Some practical solutions and the impact of the Zondo Commission will also be discussed.

Cherese Thakur
Legal Researcher
cherese@hsf.org.za