POLITICS

Treasury: Why The Procurement Unit Is A Target

The office of the chief procurement officer is seemingly under assault. The reason is quite simple: because it blocks tenders.

09/10/2017 16:26 SAST | Updated 10/10/2017 04:58 SAST
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Finance Minister Malusi Gigaba and President Jacob Zuma during a recent Brics summit. Gigaba allegedly plans to review the powers of the office of the chief procurement officer.

COMMENT AND ANALYSIS

The office of the chief procurement officer (OCPO) at National Treasury is seemingly in the crosshairs of an effort to "restructure" it and to review its powers and abilities -- and it's not difficult to understand why.

The OCPO has been the scourge of profligate government departments across the board: from the departments of social development, public enterprises and water and sanitation to the department of energy and the presidency, which wanted to start the nuclear power procurement process without adhering to due process. It has saved the taxpayer billions of rands annually, has reined in extravagant ministers and has subsequently made powerful enemies.

Transparency is powerful toolSchalk Human, former acting chief procurement officer

The OCPO has taken on Eskom, the Passenger Rail Agency of SA (Prasa), the SA Social Security Agency (Sassa) and the Guptas. Last year alone, it saved the country billions of rands by renegotiating various government supplier contracts, including vehicle procurement, cellphone contracts, medical equipment and information and communications technology (ICT). And now its allegedly under assault from within.

"Transparency is [a] powerful tool," former acting chief procurement officer Schalk Human told HuffPost SA in an interview shortly after Finance Minister Malusi Gigaba booted him out and replaced him with Willie Mathebula. Government spends R840-billion annually on goods and services. And the unscrupulous and the corrupt desperately want to get in on the action. But the OCPO stands squarely in their way.

Siphiwe Sibeko / Reuters
Malusi Gigaba on his first visit to National Treasury the day after Pravin Gordhan was fired. On the left is Lungisa Fuzile, who resigned as director general shortly afterwards. Sfiso Buthelezi, the deputy minister, is on the right.

The assault on the office of the chief procurement officer

City Press reported on Sunday that Mathebula recently met with Gigaba and his deputy, Sfiso Buthelezi, to discuss the restructuring of the OCPO and the revision of its powers, which, according to minutes of the meeting seen by the Sunday newspaper, often acts in a "dictatorial" way. If the proposed intervention by Mathebula, along with the ministry, is carried out, it could see the OCPO's ability to manage and direct government's annual spend being severely curtailed.

The shadow state which has emerged over the last couple of years would arguably be bigger and more corrupt if it were not for the OCPO.

And this is bad news. Because ever since it was established under the direction of former minister of finance Pravin Gordhan in 2013, the OCPO has managed to construct a standardised procurement framework within which the state manages large tenders and contracts -- exactly the terrain where state capture has flourished. The OCPO has been one of the taxpayer's most important bulwarks against industrial-scale corruption, with its Governance, Performance and Compliance Unit (GPC) at the forefront of closing down space for corruption and fraud.

The shadow state that has emerged over the last few years would arguably be bigger and more corrupt were not for the OCPO.

Before the OCPO existed, government departments could award tenders as it saw fit. But under the current rules, all tenders awarded by national departments exceeding R500,000 need to comply with the OCPO's rules and regulations, at municipal level the threshold is R200,000 and for state-owned enterprises (SOEs) it's R2-million and above.

The GMC acts as the 'teeth' of the OCPO, assessing the value and worth of tenders, investigating the particulars and background of those bidding for contracts and reporting to the CPO when they smell something dodgy.

Human, who was ousted after receiving a letter from Gigaba, told HuffPost last month that the OCPO's efforts in clamping down on and cancelling irregularly awarded tenders, investigating the Tegeta/Eskom deal and various other efforts to ensure transparency and value for money "was not very popular in certain quarters" and that it operated in "a difficult political environment". "We haven't shied away from Tegeta, Eskom or the Guptas. We were not popular. It [the investigations] was frowned upon," he explained.

The OCPO has bared its teeth... and made enemies

The GMC acts as the "teeth" of the OCPO, assessing the value and worth of tenders, investigating the particulars and background of those bidding for contracts and reporting to the CPO when it smells something dodgy. "The GMC deals with audits, it deals with facts and it is the visible part of the OCPO. Despite the rubbish you might hear from certain media outlets, the GMC has done sterling work, investigating government's top 100 suppliers and ensuring savings of more than R7-billion in the last year," Human said.

He added that "massive tenders had been messed up" in the past: "Efficiency in public procurement will always lead to savings for the taxpayer."

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Finance Minister Malusi Gigaba listens while his deputy, Sfiso Buthelezi, addresses a media conference earlier this year.

A former senior Treasury official tells HuffPost that the OCPO is not only important to Treasury "but critical to the functioning of government as a whole."

"The OCPO existed in various guises before, but it was established precisely because we wanted to elevate the function of procurement to the level of a deputy director-general. Its function is to craft and implement procurement policy, ensure monitoring and evaluation and building capacity [within government departments]," the former official explains.

The question remains why the ministry would want to change the scope and the mandate of the OCPO – an office that has clearly and according to successive annual reports by Treasury been a big success.

Its aim was never to act as a "policeman" or "watchdog", but rather to ensure transparency in order to make it difficult to abuse the system, he says.

He, however, flags criticism by many groupings and individuals of the Preferential Procurement Policy Framework Act (PPPFA), which guides the acquisition of goods and services from designated groups such as black-owned businesses, women and the youth, as one of the possible reasons why the OCPO might be under assault. "Many of them just want to make as much money from the state as they can, without understanding that there is a need to balance the affirmation of black business with the need to deliver services. We refused to vulgarise transformation that way and to succumb to the demands of rent-seekers."

The question remains why the ministry would want to change the scope and the mandate of the OCPO -- an office that has clearly and according to successive annual reports by Treasury been a big success.

There will be no fundamental changes to the way the OCPO operateWillie Mathebula, acting chief procurement officer

The answer must surely lie in government's massive annual spend and the ability to control the awarding of tenders -- a function that the OCPO and Treasury has largely taken charge of, much to the chagrin of ministers such as Nomvula Mokonyane (water and sanitation) and Bathabile Dlamini (social development), who have led the charge on the institution and its previous minister. Gigaba, who previously presided over the reconfiguration of various SOE boards to seemingly suit vested factional interests, could help to limit the influence of the OCPO and hand the powers to contract and award tenders back to departments.

And this will lead to a free-for-all where tenders are awarded by dodgy tender committees in dark rooms and lots of cash to play with.

The OCPO has kept a tight grip on government tenders and contracts. That grip is now set to be loosened.

There won't be any big changes, says Mathebula

Willie Mathebula, who replaced Schalk Human as acting chief procurement officer (OCPO) last month, told HuffPost in an unpublished interview recently that he would build on the OCPO's established practices and try to strengthen existing processes. "There will be no fundamental changes to the way the OCPO operates," he said.

During the interview, he made no reference to any plans to restructure or to revisit the OCPO's mandate and reiterated the importance of the unit's role, saying state institutions that are "blatantly ignoring" supply chain management directives must be brought into line. But some officials in Treasury fear that Mathebula, who has been with the OCPO since its inception, won't be able to push back against Gigaba and that he won't be able to fend off efforts to hobble the OCPO. "He isn't senior enough to resist," one official said.

Mathebula also referred to the PPPFA that has copped a lot of criticism from the Black Business Council and Mzwanele Manyi's Progressive Professionals' Forum. They argue that certain provisions within the act hamper public procurement from designated groups like black-owned businesses, women and the youth.

Mathebula said the mooted Procurement Bill, which has been approved by Cabinet but is yet to be published in the Government Gazette, will address many of the concerns raised. He did, however, explain that a study by the OCPO has shown major successes in broadening government's supplier base in favour of designated groups and that 61% of these businesses are black-owned.