South Africa - All Is Not Well With Government Tenders
blurb:isstoday:25062008satenders
25 June 2008: South Africa - All Is Not Well With Government Tenders
The tender process used to be a tool to foster transparency and prevent corruption in procurement. As a governance mechanism, the tender was always better appreciated in the context of the public sector and its phenomenal procurement undertakings. However, the frequency with which public officials are embroiled in tender controversies unfortunately marks the end of the road for the tender as a reliable antidote to corruption.
In the treacherous environment of a capitalist South Africa, just about every major state deal raises serious questions of conflict between an official’s public obligations and his or her private interests. This cuts across all sectors and departments but particularly poignant when it happens in those ministries that are at the direct interface between government and the poor, the aged, the disabled, children and other vulnerable social groups.
The minister of social development Dr Zola Skweyiyais still fighting desperately to salvage his reputation and that of his ministry after it was alleged that his wife Thuthukilehad a stake in a company that stood to benefit from a R70 billion contract to distribute grants nationally. The minister’s spokesperson has since disputed this figure, whittling it down to R3 billion over a three-year period - as if that alone was not a considerable amount.
Interestingly, a few years ago, the minister had urged drastic punitive action against the very same company for what was deemed gross violations of contractual agreements and human rights in the payment of pensions in the Eastern Cape. This was not to be the company’s last transgression. Last year the Social Security Agency was investigating the company’s officials for allegedly defrauding social grant beneficiaries in Limpopo. Is such a company fit to deliver on a national contract? The department is still intent on proceeding with the tender process. The company in question is certain to bid, and how it fares shall be of great interest.
The subsequent revelation that Allpay, another grant distributing company, had also shown keen interest in disbursing the multibillion rand social grants tender has not been good news either. An Absa subsidiary, Allpay is an empowerment partner to South African businessman Tokyo Sexwale’sBathoBonke scheme from which minister Skweyiya’s wife allegedly received 45 800 shares. About two months ago these were worth R1.2 million. The minister had said that his wife was only offered 1000 shares.
Whatever the number of shares, the story is enough to create the perception that Sexwale’s generous gesture to someone close to the minister, whose department is in charge of the tender, puts Allpay in a potentially advantaged position.
The question then is whether it would be appropriate for Skweyiya’s department to award a controversy-ridden tender to a man who has given numerous shares to his family.
Most would also remember the controversial R65 000 loan for the renovation of the minister’s home. A consortium, of which the minister was reportedly a part, advanced the loan a few weeks after it had pushed for the minister to award it a R500 million tender to develop new information technology required to administer social grants. How is that for greasing the wheels of business? The loan’s prompt repayment did little to reverse reputational damages.
In the meantime the social pensions system has still not been replaced, and the department is keeping mum on the matter, declaring it sub-judice. Considering that many of the problems experienced in the social security system often relate to the Social Security Pension System (Socpen) itself, the overhaul is by now long overdue.
Dozens of other state departments and their private sector accomplices are enshrouded in even more serious tender controversies, casting a long shadow on the future prospects of the unholy marriage of democracy and capitalism. While relatives, spouses and friends of politicians cannot be barred from doing business with the state, the onus is on the politicians to make every effort to shun business alliances that compromise their public integrity.
Andile Sokomani, Researcher, Corruption and Governance Programme, ISS Cape Town
RESPONSE TO ISS ARTICLE
The article entitled South Africa - All Is Not Well With Government Tenders (25 June 2008) on the ISS website, referring to the social grants payment tender at the SA Social Security Agency, has reference.
We associate the Institute of Security Studies with thorough informed research and analysis, and were therefore surprised by the article. It is a rehash of stories that appeared in City Press in March this year, in which the paper accused the Minister of Social Development, Dr Zola Skweyiya of an alleged intention to award the social grants payment tender to business entities linked to his spouse as well as to so-called dithering with regard to replacing a dated social pensions IT system.
It is unfortunate that no attempt was made to solicit a comment from the Minister or SASSA, nor was any effort made to obtain information beyond the City Press allegations.
The unbalanced article has cast doubt cast on the Minister’s integrity as well as on the credibility of Sassa’s procurement processes. In terms of the Public Finance Management Act, no Minister is involved in the drawing up of specifications, evaluation, adjudication and awarding of tenders. All such administrative processes are handled by committees appointed by the accounting officers such as directors-general. Ministers only make policy decisions.
The current distributors of social grants, appointed by the provinces, are Allpay, Cash Paymaster Services (CPS), Empilweni, the SA Post Office and the four major banks. The writer mentions problems that have been experienced with some of the service providers who currently disburse social grants. The Minister has also on a few occasions expressed his preference for the Post Office as government’s service provider of choice. In pursuance of that objective, Sassa, the department of social development and the Post Office entered into a memorandum of understanding in terms of which the Post Office is building capacity for it to fulfil the role in future. In the meantime, Sassa is using the existing service providers.
The Minister and SASSA are also concerned about the fact that certain service providers have dominated the social grants payment market since the service was opened up. In the current bid process, instead of looking for one service provider to ensure uniformity of services nationwide, SASSA decided to subdivide the bid into nine provincial tenders. This will prevent the development of a monopoly and allow opportunities for new entrants into the market. The tender is valued at approximately R3 billion a year over a period of three years and not R70 billion.
With regards to the insinuation that the Minister’s spouse stands to gain money from the bidding process, the ISS should see the City Press of 15 June 2008 following the Minister’s complaint to the Press Ombudsman. The City Press stated that the allegations that the Minister’s spouse would “coin it from R70bn contract” could not be sustained by the facts, and retracted the subheading “Wife may coin it from R70 billion contract” and apologised for embarrassment caused.
The SASSA tender process is on track and is proceeding according to plan. There is nothing untoward in the manner in which this tender has been handled. The entire process is being audited by the office of the Auditor-General for compliance with procurement prescripts. Due to the magnitude of the tender it has been necessary to ensure a high level of integrity and due diligence.
The writer mentions cynically that the Ministry said to City Press the matter relating to the replacement of the social pensions IT system (City Press March 29) was sub judice. The matter is before court, as is standard procedure, we cannot publish the details in public to avoid compromising the court process.
Lakela Kaunda
Special Advisor on Communications
Ministry of Social Development
