State of procurement disaster: a new license to loot

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By Caroline James
First published on amaBhungane

When President Cyril Ramaphosa announced the State of Disaster on the energy crisis in his SoNA speech, he lauded the benefits of the declaration. He explained that it would “enable us to accelerate energy projects and limit regulatory requirements while maintaining rigorous environmental protections, procurement principles and technical standards”. 

He also attempted to reassure the nation that “the Auditor-General will be brought in to ensure continuous monitoring of expenditure, in order to guard against any abuses of the funds needed to attend to this disaster”.

Now that the regulations under the Disaster Management Act have been gazetted, we can see how woefully inadequate they are in giving effect to those promises.

A statement issued by members of the civil society Procurement Reform Working Group (PRWG) – of which amaBhungane is a member – notes, “It appears from the regulations that all state institutions are now freed to pursue emergency procurement in an astonishing variety of open-ended situations. They can do so to increase electricity generation capacity, to maintain critical infrastructure, to keep specific essential services running, but also to minimise the impact of load shedding on livelihoods, and effectively anything else. In such expansive terms, any reasonable relation between emergency conditions and procurement procedures is lost. This is a licence to plunder. It can be a cover for every imaginable scheme.”  

The regulations allow for emergency procurement, but neither go far enough to truly enable a rapid and effective response nor provide for sufficient accountability mechanisms.

It is unquestionable that we need provisions for emergency procurement. In times of crisis, officials need to be able to react with urgency, and to use procurement processes to respond to the crisis. However, there are two fundamental elements that should be present in emergency procurement processes: that the process actually facilitates speedy procurement of necessary goods and services; and that, because of a departure from regular process, there is enhanced monitoring of that procurement to avoid abuse. 

The goals of the energy crisis regulations are to minimize the impact of load shedding, enable the connection of new generation of electricity and to improve Eskom’s plant performance. A variety of ministers are given broad powers to take action to achieve these goals, and procuring goods and services will be a vital component of that action. However, there is no explanation of how that emergency procurement must be conducted; that is left to National Treasury to address in instruction notes.

In fact, as the PRWG statement highlights, the regulations appear to provide unlimited discretion to the executive, via section 5 (1) of the regulations which provides that any cabinet minister can issue “directions” – effectively ad hoc instructions – within his or her portfolio mandate. 

The PRWG statement notes, “This is a flaw we have seen result in misuse of procurement processes by ministers in the recent past. It involves an extremely broad expansion of executive authority, which rubs against the checks and balances of our Constitutional framework.”  

Emergency procurement is usually characterised by less reliance on competitive bidding processes and by greater discretion given to procurement officials. However, the trade-off for these relaxations in procurement rules has to be a regime of increased oversight and accountability.

The discretion granted to officials is necessary to enable the type of flexible emergency procurement that is required by a state of disaster, but that discretion must be fettered through measures to increase oversight and guidelines on how decisions should be made. 

Although the regulations do require that the Auditor-General conduct “real time audits” and report on the financial management of emergency procurement, they do not provide any detail on how this is to be done. It is particularly glaring that nothing is said about Eskom – at the centre of this crisis – which is not audited by the Auditor-General. 

The regulations oblige procuring entities to publish and report all emergency procurement to Parliament monthly. However, there is no indication that the publication will be to a greater audience. It is imperative that this emergency procurement be fully transparent. 

The data – tender adverts (if used), suppliers, value of contracts, and implementation – needs to be published on a publicly-accessible portal and at least every week. 

The level of corruption that occurred during the Covid-19 State of Disaster demonstrated that the oversight of that emergency procurement was clearly inadequate. Nothing in the president’s statements or these regulations indicate that the oversight system has been strengthened. All we have is the president’s platitudes that the Auditor-General will “guard against any abuses”. 

In an emergency – necessarily an atypical event – we cannot expect a business-as-usual approach to procurement to do the job. 

The State of Disaster provides an opportunity for South Africa to hone its emergency procurement processes in a way that enables swift and effective response to crises but protects against the mass looting we have seen in the past. 

We must ensure that the country takes this opportunity.

Read the full Procurement Reform Working Group statement here.