<\/p>\n
You can also listen to this podcast on iono.fm here.<\/p>\n
JIMMY MOYAHA: The latest proposals by National Treasury relating to the General Public Procurement Regulations amendments have been out in the public for comment. The window of comment closed a little earlier this month.<\/p>\n
We\u2019re going to look at this in more detail, and try to unpack the potential implications of these latest draft proposals.<\/p>\n
Read:
Rigid, centrally-controlled regulation a \u2018breeding ground\u2019 for corruption \u2013 BMF
New public procurement rules won\u2019t stop corruption and will raise costs<\/p>\n
I\u2019m joined on the line by the executive director at the Centre for Development and Enterprise, Ann Bernstein, to see if we can make sense of this. Ann, lovely having you on the show, as always. Thanks so much for taking the time.<\/p>\n
Give us an overview \u2013 and perhaps [some] background \u2013 around the particular draft regulations that have been put forward here, and perhaps how they differ from what we currently have in place around the Public Procurement Act.<\/p>\n
ANN BERNSTEIN: Good evening. Public procurement is really important. There\u2019s no authoritative estimate, but at least R500 billion is spent by the state and state-owned entities every year.<\/p>\n
This is not just a financial issue. This is how government buys the goods that we need as a society.\u00a0It affects what textbooks we get \u2013 do we get them on time, do we get them at a decent price?<\/p>\n
It affects whether the hospital has machines; does it have the medicines you need? Do you know whether the municipality gets the fuel for the bakkies to fix your water pump?<\/p>\n
This is a very important issue, and it has been a singular failure in many respects in the country until now.<\/p>\n
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We don\u2019t buy well \u2013 we buy at very high costs, and often there are enormous delays which push up the costs, and all sorts of things that go wrong.<\/p>\n
So Treasury has come with these draft regulations. I should immediately say there are some things \u2013 we\u2019re not rejecting this wholesale. We\u2019ve looked at it very carefully.<\/p>\n
There are some things like \u2018greater transparency\u2019 that are good reforms, and we would support those.<\/p>\n
But we are very concerned about the provisions for preferential procurement.<\/p>\n
We think these are complex, and they are going to push up the costs of procurement throughout the state system.<\/p>\n
So there are really two issues that you should ask yourself. The one is how simple these procurement rules are. Do you and I understand them? Does the average official understand them in Rustenburg or in some part of a great big state-owned enterprise, an SOE? Are they simple?<\/p>\n
Now \u2018simple\u2019 is very important \u2013 because when you introduce complexity, there\u2019s this decision, there\u2019s this uncertainty, there\u2019s this delay \u2013 or there are these three people you have to get the okay from.<\/p>\n
At each stage of that complexity opportunities for delay and for corruption come in.<\/p>\n
So you have to think about simplicity, and you have to think about value for money. This is how they spend our tax money, and we\u2019ve got to get value for money because we have an expanding population and we don\u2019t have a lot of money.<\/p>\n
Those are the criteria one needs to think about when looking at the new draft regulations.<\/p>\n
JIMMY MOYAHA: Ann, this is clearly an important issue that we do need to address. We know, as you\u2019ve highlighted, some of the problems we\u2019ve experienced in the past. How far does this draft policy go in addressing this? And where does the policy perhaps miss some of the key things that we\u2019ve been made aware of in our investigations in the past as to where public procurement has been lacking?<\/p>\n
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ANN BERNSTEIN: Well, we\u2019re very concerned about the preferential procurement provisions of these draft new regulations. We think they increase complexity, they increase opportunities for corruption, and they\u2019re going to be expensive and difficult to implement.<\/p>\n
There are three different ones. These are very complex. I don\u2019t want to go into the detail because people will get lost in the detail, but in our view the government should substantially reconsider the proposed regulations.<\/p>\n
They\u2019re proposing set-asides for certain kinds of people and firms.<\/p>\n
They\u2019ve changed the requirements of the B-BBEE provisions that everybody\u2019s been working toward \u2013 for example, regarding the majority black-owned companies.<\/p>\n
They\u2019re now saying they have to be 100% black-owned companies if they\u2019re going to qualify.<\/p>\n
I can bore you all with some of the detail, but essentially we are saying, \u2018Reconsider the set-asides\u2019. These are inherently inefficient and shouldn\u2019t be used.<\/p>\n
We should ditch pre-qualification. In other words, if you don\u2019t qualify, you don\u2019t even have a chance to tender for some items; the state ones.<\/p>\n
We\u2019re saying this is a terrible approach to procurement. It will reduce competition and therefore prices will go up.<\/p>\n
We\u2019re saying abandon the compulsory subcontracting model. So if you get a tender [involving] over R100\u00a0million, they can ask you, after they\u2019ve done a feasibility study, that there are three or more companies that could tender for subcontracting an enormous proportion of this big tender of R100 million. We\u2019re saying this is going to drive up costs dramatically.<\/p>\n
So there are a whole lot of areas, especially with regard to preferential procurement. We are saying this is the wrong road to go. It\u2019s going to make things more complex, and we\u2019re not going to put South Africa on a better route to spending that R500 billion every year so that we get value for money.<\/p>\n
JIMMY MOYAHA: More complex is certainly what we don\u2019t want.\u00a0Ann, before I let you go, I want to take a look at how this potential draft aligns with the Organisation for Economic Co-operation and Development standards, the OECD standards that we see being applied globally. Does this push us closer towards that alignment, or does this potentially push us further away and simply shift the goalposts?<\/p>\n
ANN BERNSTEIN: Well, I don\u2019t know the OECD sort of standard. We didn\u2019t look at that. We looked at the detail of this \u2013 a 102-page set of draft regulations \u2013 to try and understand what they were trying to do, and whether we thought this would help the country.<\/p>\n
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The bottom line is that the fastest way to empower the largest numbers of black South Africans is to have a state that works, and not one mired in corruption or hamstrung by complicated, time-consuming procurement processes that seek first and foremost to funnel resources to favoured constituencies.<\/p>\n
Here one of the lessons we need to learn from the last 25 years is that if you have a policy, say on procurement, and then you load onto it not just how to procure but other social policies as well \u2026<\/p>\n
Who to procure [from] \u2013 women-owned companies, 100% black-owned companies, small businesses, a long list, disabled people, veterans \u2013 these might be people we do want as a society to assist, but don\u2019t do it through procurement in this way.<\/p>\n
It makes it very difficult to know how we get value for money.<\/p>\n
So we\u2019re really saying this is the wrong approach in the preferential procurement area.<\/p>\n
There are some positives like greater transparency overall, but this is the wrong approach to deal with how we spend so much money which affects so many millions of South Africans.<\/p>\n
JIMMY MOYAHA: The basis is simple. We would like a state that works, because a working state is one that looks after its people.<\/p>\n
We\u2019ll have to leave the conversation on that note.<\/p>\n
The executive director for the Centre of Development and Enterprise, Ann Bernstein, joined us to take a look at the latest draft regulations around public procurement which have been put forward by National Treasury, and to try to make sense of what it is that they aim to achieve.<\/p>\n
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