Introduction

The current state of the South African (SA) government’s Supply Chain Management (SCM) is fraught with malpractices which include lack of good governance, fair, equitable, transparent, competitive and cost-effective procurement process. Generally, SCM performance in government departments is effective, although it became evident that the departments experience obstacles during the implementation of SCM processes and procedures. Furthermore, procurement planning is inadequate and needs improvement when the departments procure goods, services or works. Procurement execution was also found wanting, especially with regards to procurement governance.

The South Africa context

Procurement reforms in the South African (SA) government started in 1995 and were directed at two broad focus areas, namely, the promotion of the principles of good governance and the introduction of a preference system to address certain socio-economic objectives. The procurement reform processes were supported by the introduction of a number of legislative measures, including the adoption of the Public Financial Management Act (PFMA) and the Preferential Procurement Policy Framework Act (PPPFA) (National Treasury, 2003). The PPPFA was endorsed as a result of Section 217 of the Constitution of the Republic of South Africa which (Republic of South Africa 1996) stipulated the need to implement a procurement policy that will provide preference in the allocation of contracts, and prevent unfair discrimination. PPPFA requires that when government assesses contracts, it must take into consideration the preference point system which prescribes functionality, price, and the Reconstruction Development Programme (RDP) goals. The PPPFA was amended by the Department of Trade and Industry (DTI) and the National Treasury, after the approved B-BBEE Codes of Good Practice in 2006, to advance the objectives of the Broad-Based Black Economic Empowerment Act (B-BBEE Act) and its strategy, as these two legislations were not aligned. The alignment led to the amendment of the Preferential Procurement Regulations (PPR) which was effected in 2011 (National Treasury 2011).

The Constitution of the Republic of South African (108 of 1996 Section 217) states that when an organ of state of the national, provincial and local spheres of government procures goods or services, it must do so in accordance with a system which is fair, equitable, transparent, competitive and cost-effective. However, the practice prior to 2004 was far from the ideal in a sense that procurement and provisioning activities were rule driven, and value for money was almost always equated to the lowest price tendered; procurement and provisioning activities were not linked to budgetary planning; the bid documentation was not uniform, causing uncertainty to bidders and practitioners; and the Preferential Procurement Policy Framework Act, No 5 of 2000 and its associated regulations were complex and difficult to implement (National Treasury, 2004: 2). The afore-mentioned led to the approved adoption of a policy strategy to guide uniformity in the Procurement Reform Process in the government by the South African National Cabinet in September 2003. This was done to replace the outdated procurement and provisioning practices across government institutions with Supply Chain Management (SCM) functions that integrate financial management in procurement processes and conform to international best practices (National Treasury, 2004;5;6;11). The SCM which was implemented in 2004, is a tool that government initiated to manage the procurement process to ensure best practices. In order to achieve effective procurement practices, compliance audit is one of the control measures used to establish and prove adherence to legislation, regulations and policies. Cosserat (2004: 21) states that “a compliance audit involves obtaining and evaluating evidence to determine whether certain operational activities of an entity conform to specified conditions, rules and regulations.” According to the Monitoring and Evaluation (M&E) framework, organizations are required to establish policies and procedures that provide reasonable assurance that their quality controls are relevant, adequate and comply with best practice. The process includes both ongoing consideration and evaluation of the elements of the quality control system (Cosserat, 2004: 27). The problem is that since the introduction and implementation of SCM, the SA Auditor General’s (AGSA) reports for 2012 and 2014 on procurement and contract management indicated that there are many malpractices (Auditor General South Africa 2014).

Public procurement operates in an environment of increasingly intense scrutiny driven by technology, programme reviews, and public and political expectations for service improvements (Bolton, 2006; Eyaa & Oluka, 2011). Procurement is central to the government service delivery system, and promotes aims which are, arguably, secondary to the primary aim of procurement such as using procurement to promote social, industrial or environmental policies (Cane, 2004). Prior to 1994, public procurement in South Africa was geared towards large and established contractors. It was difficult for new contractors to participate in government procurement procedures. However, public procurement in South Africa has been granted constitutional status and is recognised as a means of addressing past discriminatory policies and practices (Bolton, 2006: 193). Reforms in public procurement in South Africa were initiated to promote the principles of good governance, and the National Treasury introduced a preference system to address socio-economic objectives. The reform processes were due to inconsistency in policy application and the lack of accountability and supportive structures as well as fragmented processes.

Matthee (2006: 65) asserted that a uniform implementation approach to procurement was required, due to a research study on opportunities for reform processes in the South African

government (2000) conducted by the Joint Country Assessment Review (CPAR) and the World Bank in 2001. The deficiencies and fragmentations in governance, interpretation and implementation of the Preferential Procurement Policy Framework Act (PPPFA) Act No 5 of 2000, resulted in the introduction of supply chain management (SCM) in the public sector as a policy tool (National Treasury, 2005: 8). In 2003, a SCM document entitled ‘Supply Chain Management: A guide for accounting officers/authorities’ was developed to guide the adoption of the integrated SCM function and its related managerial responsibilities (National Treasury, 2005: 5). This was government’s attempt to achieve the desired strategic

policy outcomes through public procurement (McCrudden, 2004: 257). Despite the reform processes in public procurement and the employment of SCM as a strategic tool, there are predicaments in South African public procurement practices, for example non-compliance with procurement and SCM-related legislation and policies as well as tender irregularities (Smart Procurement, 2011). According to De Lange (2011), ‘Taxpayers were fleeced of R30 bn. Corruption, incompetence and negligence by public servants’ were to be blamed. The South African government spent R26.4 billion in 2010 in ways that contravened laws and regulations (Smart Procurement, 2011).

Ambe, I.M. and Badenhorst-Weiss, J.A. 2012. Procurement challenges in the South African public sector. Journal of Transport and Supply Chain Management 242-261. Link: Procurement challenges in the South African public sector

Selomo, M.R. and Govender, K.K. 2016. Procurement and Supply Chain Management in Government Institutions: A Case Study of Select Departments in the Limpopo Province, South Africa, Dutch Journal of Finance and Management, 1.1(37):1-10, Link: Procurement and Supply Chain Management in Government Institutions

 

Questions 1

1.1      What are the procurement challenges in the South African public sector?

1.2      How can public procurement in South Africa be improved?