New tool to help fight conflict of interest

Dodgy government officials who spend their time running their own businesses instead of helping to run the country will find it increasingly tricky to protect their private projects from public scrutiny, thanks to new tools that have been created to improve the visibility of any conflicts of interest.

A new software package, created by six South Africans, enables businesses as well as government departments to track and audit potential conflicts of interests in their supply chain, Engineering News reports.

Designed to prevent procurement fraud, there is potential for it be rolled out widely in the public sector, where it could give the forensic information needed to combat irregularities in how government goes about sourcing good and services.

The customisable tool is called Association Matrix and it provides subscribers real-time visibility of the relationships senior executives have with suppliers, and highlights potential areas of fraud and corruption risk.

It incorporates the “Director Singularity Index” which shows the various directorships held by an individual director.

Association Matrix pulls its main data from publically available company information; mainly that which has been sourced from the Companies and Intellectual Property Commission (CIPC).

“It has already been procured by large manufacturing and financial services entities, as well as a handful of government departments and State-owned companies,” Engineering News adds.

Conflict of interest is a problem on many minds. Minister of Public Service and Administration Lindiwe Sisulu is currently preparing amendments to the Public Service Act to deal with the issue. “The proposed amendments will bar civil servants from holding directorships or being associated with companies that conduct business with the state,” reported the Sowetan.

Sisulu said: “I think that if we cut that umbilical cord, we might succeed in making sure that we are creating a cadre of the public service who is concerned with only concentrating on the job and not doing the job but at the same time benefiting from the state.”

On International Anti-Corruption Day on 9 December 2012, she said an electronic private interest disclosure system – e-disclosure – was to be implemented by March this year for all public servants in national, provincial and local government.

It would ensure an effective and proactive management of possible financial conflicts of interest between those who manage tenders and private companies. With it, the government would be able to verify the business interests of all employees with the CIPC. It would also help the director-general validate the financial interests of all those who adjudicate and evaluate tenders.

For David Lewis, the executive director of Corruption Watch, the issue is simple: “Public servants should, firstly, not be permitted to undertake any paid work in addition to their employment in the public service. Secondly, under no circumstances should public servants or members of their families be entitled to own a company that provides goods or services to the department in which they are employed,” he says.

Today, the DA is due to submit a Bill in Parliament to regulate the business interests of state employees. The Bill seeks to:

• Prohibit government employees and their families from directly or indirectly holding more than 5% of shares, stock, membership or other interests in an entity that does business with government, unless approval is given by the relevant minister in accordance with certain criteria set out in the Bill.
• Ensure that, before the government enters into any contract with an entity for the sale, lease or supply of goods and services, the entity must provide an affidavit disclosing whether or not it is owned or part-owned by employees of the government; and
• Ensure all government employees disclose their business interests at prescribed intervals, in the same way that members of Cabinet already do.

Extent of conflict of interest in government

In 2010 it was estimated that R624-million worth of public funds went to companies with links to civil servants or their family members.

The Auditor General’s 2011/12 report revealed that the Free State government had awarded 50% of its contracts to politicians and their family members. It was also disclosed that about 191 government officials and 18 close relatives benefitted from state tenders valued at R133-million in the last financial year.

According to PriceWaterhouseCoopers, the Eastern Cape Health Department has lost at least R45-million to corruption and irregular contracts with state employees.

Documents leaked to Corruption Watch from a high-level probe into corruption in the Eastern Cape health department show that 8 034 department employees are directors of active companies, while 929 are listed suppliers to government. The probe has also shown that R11-million was paid over a period of four years for services provided by 35 companies whose directors were spouses of department employees.

During the 2010/11 financial year, civil servants in the province and their family members secured almost a R1-billion in government tenders: suppliers won 485 contracts worth R891-million, and councillors and their families benefitted from nearly R100-million worth of Eastern Cape municipal government tenders.

The Department of Basic Education has revealed that in the past two financial years, about 3 314 of its employees had done business with the state, earning a combined sum of R152-million. Of these employees, 2 485 were teachers.

What public servants need to know

Public servants can prevent conflicts of interest in their work by following a few simple actions:

• Disclose your financial interests if you are in senior management.
• Do not bid for government contracts at local government level if you are employed at municipal level.
• Do not engage in outside paid work without prior approval.
• Do not engage in activities that could compromise your performance in the public sector.
• Do not engage in any activities that could damage the reputation of the public entity you work for.
• Withdraw from supply chain management processes if you have an interest in a contract being awarded.