An Analysis of Procurement Practices in South Africa (Part 1 of 3)

2022, Articles, City of Johannesburg, News, Procurement
The Notion of Public Procurement within the South African Regulatory Framework

Article by Matilda Mahlaba (Candidate Attorney), checked by Alisha Naik (Associate)
Released by Maike Gohl (Partner)
28 October 2022

INTRODUCTION

This article is part of a 3-part series aimed to take the reader through the following topics:

  • Part 1 an introduction to the concept of public procurement; the governing regulatory framework and the national challenges faced generally.
  • Part 2 the various types of public procurement contracts and the role of the courts;
  • Part 3 potential solutions to the challenges and governance framework measures.

Public Procurement is described as the purchasing of goods or services and hiring contractors by any contractual means, by the government and its organs of state. However, public procurement is not only exclusive to procuring goods and providing services, it also promotes broader social, economic and environmental outcomes. It therefore encompasses a broad spectrum of activities and instruments within government entities which is set towards its main goal – the delivery of goods and public services.

REGULATORY FRAMEWORK

Following the promulgation of the Constitution of the Republic of South Africa (“the Constitution”), public procurement was granted constitutional status under section 217 of the Constitution, which provides that when an organ of state contracts for goods and services, it must do so in accordance with the principles of fairness, equitability, transparency, competitiveness, and cost-effectiveness. Since democratisation an array of legislative measures in the field of public procurement followed, which include the Preferential Procurement Policy Framework Act 5 of 2000, the Public Finance Management Act 1 of 1999, the National Treasury Regulations of 2005, the Preferential Procurement Policy Framework Regulations of 2001 and the Municipal Financial Management Act 56 of 2003 which were enacted to provide for new regulatory frameworks for public procurement.

CHALLENGES FACED IN RESPECT OF PUBLIC PROCUREMENT

Despite the seemingly strong and extensive public procurement regulatory regime, South Africa still faces far-reaching challenges in this sector. In fact, not only does the legacy of a politicalised public procurement system continue to haunt the sector, but continued political interference and corruption avert the main functions of public procurement canvassed above.

In fact, most recently, the challenges were brought to light amidst the COVID-19 pandemic and subsequent national lockdown, wherein various government entities were tasked with ensuring the provision and continuation of essential services such as providing sanitisers, gloves, masks, and other personal protective and medical equipment – which proved vital in addressing the immediate medical and socio-economic needs of the poorer communities. In this regard, national government had failed to devise and roll out a comprehensive, sustainable plan to ensure that, for instance, food reserves would reach households in poorer communities during the national lockdown.

This, in and of itself, shows that the integrity of South Africa’s public procurement process is at high risk due to, inter alia, national governments alleged mismanagement of funds, corruption and fraud – which costs citizens of South Africans millions of rands annually. Should this be proven to be factually correct, such unethical behaviour has major implications on supply chain management, due to the lack of compliance and application of guidelines prescribed by the National Treasury. The reason for this is heavily dependent on a lack of appropriate bid committees, the use of unqualified suppliers the lack of transparency in the end-to-end procurement process and the utilisation of incorrect procurement processes in respect of threshold. As a result, the trickle down effect is that local municipalities in government face service delivery complications due to the lack of in-house capacity for the planning and implementation of any social development programs.

CONCLUSION

It is quite clear that the purpose and aim of the public procurement process is set out to provide services and goods to taxpayers in South Africa. However, due to the administrative challenges it faces, it is almost impossible for it to be effective and efficient in order to preserve its integrity, despite it having regulations and legislations mentioned above, until such time that the process is transparent and there is proper accountability for mismanagement of the process.

VALUE

An introduction to the Public Procurement Process.

Feel free to contact us for more information on public procurement or procurement generally.

Please note: this article is for general public information and use. It is not to be considered or construed as legal advice. Each matter must be dealt with on a case-by-case basis and you should consult an attorney before taking any action contemplated herein.

Maike Gohl
PARTNER
Alisha Naik
ASSOCIATE
Matilda Mahlaba
CANDIDATE ATTORNEY
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