2024 Procurement Watch report unpacks current procurement risk trends

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Corruption Watch (CW), partnering again with procurement law expert Prof Geo Quinot of Stellenbosch University, today released the 2024 Procurement Watch Report on Procurement Risk Trends. This is the fourth in CW’s series on procurement risk trends, and presents an analysis of selected forms of procurement data between 2016 and 2024. Previous reports were published in 2021, 2022, and 2023, all of which focus specifically on trends in contract deviations and expansions, and restricted suppliers.

This report provides an update on the previous reports and identifies notable developments since the previous reporting period. The data is drawn from reports submitted to National Treasury by all procuring organs of state, the analysis of which is made possible by CW’s online tool, Procurement Watch, which aggregates data from the individually published reports.

It is important to note that while deviations and contract expansions can raise red flags and point to a lack of planning for procurement requirements, they do not necessarily indicate abuse of the public procurement system, as there could be valid reasons for such.

The report also includes a brief outline of the rules and regulatory regime governing public procurement and the general mechanisms to address their abuse, with specific attention given to the rules that govern deviations from normal procurement procedures and expansion of contracts.

Reported deviations: 2016–2024

The most significant observation regarding the deviation data of the 2023/24 financial year is the material increase in the number of reported deviations in 2022/23. The data shows a massive increase of 207% from 2022/23 to 2023/24. While deviation numbers had been decreasing from 2017/18 to 2021/22, the sudden surge in deviations in the last two years is a cause for concern. It is important to note, however, that this analysis is purely based on reported data, and may reflect increased reporting of deviations rather than an actual increase.

Interestingly, despite the dramatic increase in the number of reported deviations between 2021/22 and 2023/24, the value of deviations fluctuated significantly, based on the reported deviation value. In many instances the deviation value was not reported. A comparison of the total reported value of procurement via deviations over the past three years shows a figure of around R34-billion in 2021/22 and R11.9-billion in 2022/23, with an increase to around R24.8-billion in the 2023/24 financial year. Thus, while the total number of reported deviations increased more than five times in value from 2021/22 to 2023/24, the value of such deviations has declined, but it is unclear whether this represents a trend.

The highest number of deviations reported in 2023/2024 was by the Department of Correctional Services, with 1 071, followed by South African Social Security Agency with 456 and the Council for Scientific and Industrial Research with 331.

Contract expansions reported to National Treasury: 2017–2024

While reported expansions have steadily declined from 2017/18 to 2020/21, the data shows a slowing down of the decline in 2021/22 and an increase in reported expansions from 2022/23.

The total value of contract expansions in 2023/2024 exceeded R37.8-billion, based on the reported value of expansions and bearing in mind that in two instances the value was not reported. However, this is still four times less than the total reported value in 2022/23 (R157-billion), while the number of reported expansions in 2023/2024 (894) rose when compared to 2022/23 (673). The implication is that while the number of expansions is rising, the average value has declined in 2023/24.

The highest number of expansions reported in 2023/2024 was by Eskom, with 69 reported expansions, followed by the South African Forestry Company SOC Limited with 63 and Legal Aid South Africa with 58.

It is significant that National Treasury is in the top 10 list in this report, particularly given Treasury’s central role in procurement and leading the way in relation to best practices. One interpretation is that current supply chain management may not be fit for purpose.

Debarred supplier data

There are two restricted supplier lists used by National Treasury, namely the Database of Restricted Suppliers and the Register for Tender Defaulters.

Thirty organs of state have submitted supplier names to be debarred, out of 584 organs of state procuring under rules that include debarment on this list. As of June 2024, there are 183 suppliers on the restricted suppliers list, compared to 171 suppliers listed in April 2023. It should be noted that some suppliers get taken off the list when the period for which they have been on the list – usually five or 10 years – has expired.

There are various reasons for restricting suppliers from doing business with the state, grouped under the broad categories of fraud and misrepresentation, performance problems, and other unspecified reasons that may include unethical behaviour, impropriety, or a failure to deposit the proceeds of the action.

Procurement Watch

Procurement Watch enables one to identify patterns and trends in public procurement practice in South Africa. It focuses on the high-risk areas of deviations from prescribed procurement procedures and variations of contracts during implementation.

Download the report.