Treasury moves to plug corrupt Covid-related procurement
Finance minister Tito Mboweni to meet provincial finance MECs on Thursday to stress the need for transparency
Treasury and the auditor-general will soon issue control guidelines for accounting officers in a bid to limit misappropriation, fraud and corruption in the procurement of personal protective equipment (PPE) and Covid-related goods.
There has been a public outcry over the corruption taking place in the procurement of PPE, with President Cyril Ramaphosa describing those involved in this corruption as “hyenas and scavengers”.
Finance minister Tito Mboweni, deputy finance minister David Masondo and Treasury director-general Dondo Mogajane appeared before parliament’s two finance committees on Wednesday to address how the Treasury is dealing with the allegations of corruption.
Mogajane said the guidelines to be issued by the Treasury and auditor-general Kimi Makwetu would provide accounting officers with a toolkit of preventive controls to implement for procurement.
Emergency procurement for PPE and protective clothing, which opened the door for corruption, will end. Institutions will have to revert to normal, open procurement. This was made possible, he said, because there was no longer an issue of limited supplies of masks and sanitisers.
“Procurement must be compliant with all existing instructions for procurement,” Mogajane said. “National Treasury will lock an absolute price for all PPE and listed protective clothing procurement. Permission will have to be sought for any amount above the absolute price.
“Institutions will have to provide National Treasury with the names of all PPE and protective clothing appointed service providers for publishing on the National Treasury website and analysing aggregated data across all procuring agencies.”
Mogajane explained the long process that the Treasury underwent in trying to deal with the emergency procurement of PPE and protective clothing. This had involved issuing a number of instructions to directors-general and accounting officers.
A major issue at the beginning was that demand exceeded supply and prices on the Treasury’s transversal contracts for the normal acquisition of such products were no longer reflective of the market. Prices increased significantly.
An attempt to introduce a centralised procurement system did not succeed and the Treasury reverted to emergency procurement, which Mogajane said “is particularly prone to exploitation”. He noted that “rampant misuse and abuse of public resources in Covid-19 related procurement” was manifest.
The Treasury had repeatedly to alert accounting officers on the need to take responsibility for procurement as often they were not directly involved. Mogajane stressed that action must be taken against accounting officers who deviated from the price list.
Mogajane said a review of the Public Finance Management Act and the Municipal Finance Management Act would be undertaken, including with regard to emergency procurement procedures and strengthening the accountability by accounting officers and authorities. He said it was critical that public procurement be modernised and automated, with enhanced due diligence and increased efficiency in processing requests.
“Politically exposed people’s participation in public procurement will require a more stringent review, including the age of the business and the history of the same or similar type of service provision.”
The committees decided to order the Treasury to report regularly to parliament on measures being taken to combat corruption.
Mboweni said he would be meeting the provincial MECs for finance on Thursday and would stress the urgent need for transparency. This would include that all Covid-related contracts be published; which companies won them, with details of their directors and shareholders; the reasons why competitors did not win them; and the age of the companies that won the tender. It has emerged that in some cases companies only a few months old and with no history of involvement in the supply of pharmaceutical-related products had won the tenders at the expense of the experienced ones.
Mboweni said if all parties had followed the Treasury’s laid-down procurement processes there would not have been corruption. There was a prima facie case that the Treasury instructions were not followed in all cases.
In a presentation to the committee, Cosatu and the Southern African Clothing and Textile Workers’ Union (Sactwu) said there were endemic problems around the government’s procurement system, which were not limited to the lockdown.
“Essentially, these problems arise out of a procurement system that is fundamentally flawed: the architecture is not designed to mitigate fraud and abuse,” the union and labour federation said. They said by virtue of its size and scope, its decentralised nature and the lack of transparency, there are simply too many holes in the system that allow “too many places for shadows to hide”.
“There are hundreds of decentralised supply chain departments with tens of thousands of supply chain officials across the breadth of the state who conduct millions of procurement transactions valued at almost R1-trillion annually.”
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