South Africa retains its status as the most unequal nation globally. While this assertion may appear unbelievable, it holds true when considering the Gini coefficient of 0.63 recorded in 2023. This metric serves as a persistent reminder of one of the real issues we face as a nation. Regrettably, our democratic institutions have yet to make substantial strides in addressing this issue of inequality. Upon reflecting on the foundational tenets of our Constitution, we acknowledge the historical injustices, that significantly underpin the current phenomenon of how inequality is experienced.

By Vishaal Lutchman, Vice President of the South African Institution of Civil Engineering (SAICE)

The current economic trajectory suggests that the intended healing may be undone while many actors, politicians and others, may wish that division to remain. Broadly we seem to be working against ourselves with no end in sight. The behaviours of some leaders are questionable, and regulations, such as the Public Procurement Bill, currently under revision, if constructed to give effect to past and current needs, has the potential to advance our objective of mitigating inequality. This article focuses on procurement practices within the public sector.

There are two broad concepts worth exploring, namely, the purpose of procurement and the ability to use such regulations for the public and private sectors to work effectively in growing a sustainable economy for all – as mentioned in the preamble to our Constitution. Literature reveals many objectives for procurement, that when broadly summarised include concepts of fairness; competition; transparency; value for money; quality and application of standards for the purchase; construction; operation; maintenance; and disposal of assets.

In order for these objectives to be achieved, the requestor typically needs to know the product or service required; the location of where it is needed; the quantity desired; the time it is needed; and the price of the products or services. It is simplified intentionally to give easy articulation of the objectives that are often ignored and postulated in a manner that does not give effect to these objectives in a balanced manner. It may also be that the complexity of designing such a system to achieve these objectives may be difficult to implement; however attempts to do so are unfortunately not apparent in the latest revision of the Public Procurement Bill.

Simply, if we seek to address balance across the objectives, implemented with efficiency, professionalism and integrity, this would go a long way in creating much improved public-private collaboration to the benefit of both parties. The lure of money seems to entice one to behave alternatively to such an extent that we have defined new terms such a “state capture”, and “systemic or institutionalised corruption”, which gives one an indication of how significant failures in the implementation of procurement has been and in so doing achieved perhaps, one or none, of these objectives – which I assert as one of the reasons our inequality is not being properly addressed.

The consequence of this is dire and laid bare by our socio-economic KPIs. In addition, when we consider new regulations or regulatory amendments, it is reasonable to identify a good sense of the gaps: what is not working, what is best for now, and the future based on the objectives we want to achieve. The regulations should make explicit reference to such objectives and give such effect in the construction of the relevant clauses. It is on this premise that I argue the construction of the Public Procurement Bill.

It is my opinion that the current iteration of the Public Procurement Bill [B 18-2023], if passed into law, will not address the existing dysfunction within South Africa’s public procurement system, which is a key objective of the proposed legislation. The criteria for this assertion is based on the objectives. My main assertion is that the regulations are too high level, and leaves much to the regulations, that may not segue into the guidelines. Further, if the regulations are not granular enough, then the achievement of the procurement objectives will be unsuccessful thereby perpetuating the status quo. The remedy will remain in the guidelines and not in the regulations and details will remain unclear.

As much as I may simplify this assessment, we have numerous research reports, academic articles, and the Zondo Commission’s findings, that clearly explain that one of the primary causes of the dysfunctional state of public procurement in South Africa is the complex nature of our regulatory framework. Currently, there are more than 100 pieces of legislation plus a wide array of regulations, instruction notes, practice notes, policies, “circulars”, and guidelines aimed at regulating public procurement. It makes for complexity but how is it that we do not embrace the concept of complexity and deviate to abuse the existing procurement regulations and guidelines ?

Furthermore, the emphasis on government intervention and preferential treatment of specified demographic groups is also in contrast to the principle of non-racialism, counterproductive to market principles and the development of a truly competitive business environment. I believe that seeking to achieve equitable redress requires that focus groups have to be preferred and therefore disagree with the Harvard Growth Hub that recently highlighted preferential procurement as a primary cause of the collapse of state capacity. As much as redress is an objective for South Africa, I do agree that officials have not given much credence to its effective implementation without ‘fear of favour’ but chose to subvert this objective over time to the detriment of exposed or vulnerable groups.

The primary purpose of the Bill should be to integrate existing legislation to create a single piece of national legislation that regulates public procurement, including preferential procurement. It does not appear to be the case at the moment. The significance of preferential procurement is to assist our country with redress, create an environment for new business growth and economic inclusion, among others. This Bill is intended to give effect to the entirety of section 217 of the Constitution and its introduction is probably the most significant development in public procurement regulation in South Africa.

I mention this as it can no longer remain an assumption and that if there are regulation by the state, that effective implementation will happen. If we reflect on the past performance of our public procurement, we may easily argue that preferential procurement has not yielded the desired effect, although significant gains have been made. Some of the objectives missed are the development of rural economies; skills development to serve economic needs of the country; value for money with many transactions having exceeded the appointment value; delayed provision of infrastructure solutions; and sustainable job creation.

Simplifying the procurement bill’s legal framework is the most effective step government can take towards improving the public procurement system. An overarching legal framework will be welcomed as a positive step towards reform. The simplification of such a process can be made easier, and transparency can be achieved, through the adoption of digital solutions to enable integrity in the procurement process and artificial intelligence to assess the quality of the bid. These options have been available for some time but have not been considered for adoption. To some extent when we review this legislation, we are all aware of the issues with the system and it can be argued that there does seem to be concerted effort to address real issues with respect to the intent, the objectives and the outcomes.

In its current form, the Bill fails in its primary objective as it does not contain provisions that meaningfully improve the public procurement system, thus falling short of the standards in Section 217 of the Constitution. Should it be promulgated, we will find that the systemic issues will remain and if not worsen as the guidelines leave agencies with the decision to determine preferential procurement with no guarantee that its objectives will be attained. I use the inequality lens which remains relevant and should be a fundamental driver underpinning the rationale for the amendment to the Bill.

The Bill gives the National Treasury, the Public Procurement Office and organs of state significant regulatory making powers, instead of providing concrete rules for implementation. This could be problematic as most of the rules that have to be followed or applied will be contained in various pieces of subordinate legislation and may be inconsistent across public sector agencies. It is unclear when these subordinate pieces of legislation will be provided to the public for meaningful input. Key legal requirements for all procurement systems should be contained in the Bill and not left to subordinate regulations and/or policies, where these legal requirements may be subject to watering down, softer interpretation and/or regular reform.

Given that government has not been able to manage its capital outflow efficiently, coupled with the nationwide enforceability of the Bill, it should provide clear, unambiguous, accurate and consistent definitions and other core concepts, that in its current form is lacking. It suggests that that compliance to existing regulations is insufficient to make the inroads needed to make progress towards an egalitarian society.

Furthermore, those responsible for adhering to public procurement laws may well feel daunted by the litany of laws, or just pay lip service to them in departments and entities that have weak leaders, processes, checks and balances. This situation can lead to abuse by individuals and tenderers who prey on weak leaders managing procurement systems.

Nor, in our opinion, should interpretation be left to the discretion of the Minister. In other parts, the Bill is not clear which body holds the power to carry out certain aspects. For example, it is not clear who establishes the procurement “policy” that an organ of state will implement.

In principle the Bill is correct but lacks a multi-dimensional view of all its affected participants, lacks collaboration and consistency, has not undergone any confirmation testing or details of how it will provide value for money. As such a fundamentally important piece of legislation, it is more than appropriate that it must be phased in, offering the potential of fine tuning.

In addition, the Bill does not stand on its own and there are enabling initiatives required to give meaningful effect to the intention of the Bill. It has become more apparent that procurement is being used for showcasing agencies.

Public sector clients put bids into market with no intention of awarding or no budget for transactions, that is in contravention of the PFMA, for example. If this is not addressed, there will be transactions with low thresholds that do not screen quality meaningfully with the singular focus on objectives of ownership and price with no sense of quality. These are just some of the practicalities in addition to maleficence, that does not appear to be addressed. Overall, there could be a greater level of strategic foresight with regard to economic growth, sustainability and overall pragmatism that may have given an improved opportunity to achieve the intentions indicated in our Constitution.

SAICE, through our members, is a major influencer in the construction sector – a significant contributor to employment and major contributor to the national economy – and implores government to engage with the key stakeholders in the construction sector in ensuring that the revised Public Procurement Bill addresses our country’s real socio-economic dilemma.