Search

Africa's Public Procurement & Entrepreneurship Research Initiative – APPERI

Category

Political change

Has SA lost R700bn to corruption?


IOL

01 October 2015 at 2:20pm

Sintha Chiumia and Anim van Wyk

Has SA lost R700 billion to corruption since ’94? Africa Check’s Sintha Chiumia and Anim van Wyk explain why the calculation is wrong.

Durban – It’s been stated as fact that South Africa has lost R700 billion in public money to corruption since the advent of democracy in 1994. But how does one measure the cost of hidden crime?

One of the Unite Against Corruption march organisers and former general secretary of trade union Cosatu, Zwelinzima Vavi, used the R700 billion figure widely. To talk radio show host, Tim Modise, Vavi said: “R700bn could have been used to address the principal challenge of South Africa.”

Vavi also reportedly cited the number to urge Nissan assembly plant workers and a gathering of National Union of Metalworkers of South Africa members to join the march.

When he tweeted the R700bn figure, a Twitter user replied: “No ways. Lucky guess?”

Is it a guess or the result of thorough research? Africa Check got out the calculators.

On social media, Unite Against Corruption attributed the claim to the Institute of Internal Auditors. This likely refers to the January launch of the Anti-Intimidation and Ethical Practices Forum, an association of different organisations fighting corruption.

At the event, the forum’s chair and head of the Institute of Internal Auditors South Africa, Claudelle von Eck, reportedly said: “The cost of corruption in the last 20 years… we have lost R700bn.”

Von Eck confirmed to Africa Check she had made the claim, but said she was quoting the Institute for Accountability in Southern Africa. The institute’s head, Paul Hoffman, was quoted using the R700bn figure last year. (Updated from R675bn he cited the year before and in 2012.)

But Hoffman passed the buck to Tendersure, a web-based tendering tool, owned by a company called Sentigol.

“(Tendersure) worked that out as a percentage of the DP… 20% of the GDP over the last 20 years works out to that,” Hoffman told Africa Check.

An October 2011 article in Engineering News quoted the head of Sentigol, Werner Coetzee, as saying research by international anti-corruption bodies showed Africa to lose “about 25%” of its gross domestic product (GDP) to corruption.

Coetzee then explained that 25% of South Africa’s GDP of R2 700bn (likely 2010s) came to R675bn and that this figure was potentially lost to corruption.

But he told Africa Check he was misquoted: “I don’t know how anyone would arrive at that number.” The businessman said he once attempted to calculate the cost of corruption in the past 20 years, but gave up because it would “ignore the corruption during apartheid”.

Coetzee didn’t pluck the corruption formula out of thin air, but he got the wrong end of the stick.

Global civil society organisation Transparency International published a handbook called Curbing Corruption in Public Procurement in 2006. The very first paragraph states “damages from corruption” are usually estimated at “between 10% and 25%, and in some cases as high as 40 to 50%” of a country’s public procurement contracts – not its GDP.

Yet the bibliography does not contain any reference to studies showing how this share was arrived at. Africa Check contacted the organisation’s public sector integrity programme head, José María Marín, who said he’d look into it, but we haven’t yet received a response.

Since then the statement has become a tumbleweed claim: rolling along year after year, from one report to another, without source or context, supposedly holding true wherever it goes.

So how did do we end up with “R700bn lost to corruption in South Africa in the last 20 years”? Here is Africa Check’s theory, give or take R5bn:

1. The formula from Transparency International, or the various other organisations that quoted its information, made its way to South African treasury official, Sonwabo Tshoko, who stated in a 2010 presentation: “It has been estimated that R30bn per year, which is 20% of the overall government procurement budget of R150bn, is being lost or is disappearing into a black hole of fraud and corruption.”

(Tshoko has since left and Africa Check could not get hold of him or more information on the calculation via Treasury spokeswoman Phumza Macanda.)

2. South Africa’s then head of the Special Investigating Unit, Willie Hofmeyr, used this information when asked to estimate the cost of corruption in Parliament in October 2011.

According to the minutes, “Hofmeyr responded that it was difficult to do so, but one suggestion by National Treasury was that it might amount to about 20% of the annual procurement budget, or about R25bn a year.”

(Hofmeyr confirmed to Africa Check he got the information from Treasury, but couldn’t remember the exact source.)

3. The head of the Institute for Accountability, Paul Hoffman, attributed the figure of R30bn per year to Hofmeyr in a 2012 conference report. However, it seems that when the time came to present the report, he used R675bn as a total figure lost to corruption since 1994.

A news report said: “Hoffman based the figure of R675bn on government’s admission that the economy loses R30bn a year to corrupt activities. The disclosure elicited visible shock among conference goers.” (A quick calculation shows that R30bn times 18 years is R540bn, not considering inflation.)

So how much has SA really lost to corruption?

The frustrating – and logical – answer is we just can’t say for sure.

Macanda said South Africa’s Treasury does not attempt to calculate the cost of corruption. “Our observation is that people speculate and also tend to use the word corruption when what they are talking about is irregular, unauthorised or wasteful expenditure,” she said.

Africa Check spoke to Hennie van Vuuren, research associate at the Institute for Justice and Reconciliation (IJR) and writer of a 2005 Transparency International country study report on South Africa.

He said the idea that corruption costs 20% (or 10% or 25%) of public procurement came from the assumption that middlemen involved in corruption demanded 8 to 10% of a contract’s value.

“But this differs from transaction to transaction and industry to industry,” he said.

Ways to gauge trends in corruption included perception surveys and tallying detected cases.

Van Vuuren said one could even include illicit outflows – where private companies moved money to tax havens abroad – in the broader ambit of corruption, which was estimated to be in the region of R300bn in 2012 alone.

“Our need to define corruption in monetary terms ignores the much more fundamental costs of corruption – carried by individuals in weakened forms of government,” he said.

The head of governance, crime and justice division at the Institute for Security Studies, Gareth Newham, told Africa Check “we simply don’t know what the actual amount is because corruption is a crime in which both parties benefit and will seek to hide”.

However, Newham said he thought a “considerable” amount had been lost to corruption “given the large scale of the problem and the high level involvement of our political elite in corruption”.

It’s “impossible to know” how much money South Africa has lost to corruption, the executive director of non-profit organisation Corruption Watch, David Lewis, told Africa Check.

“Various people, various institutions have come up with estimates. I don’t know how they arrive at these figures,” he said.

“I am comfortable to say there is a high level of corruption in SA but you can’t rely on those estimates.”

Conclusion: the figure of R700bn is a thumbsuck.

Although a firm figure helps spur citizens to action – in a country where experts agree that it’s a big problem – this specific estimate is not reliable.

The amount probably stems from a claim that about 20% of a country’s public procurement budgets disappears into back pockets, attributable to Transparency International as far as we could tell, but not backed up by research studies. Since then it’s been mangled beyond recognition in South Africa.

* This article first appeared on Africa Check (http://www.africacheck.org), a non-profit organisation run from the Journalism Department at the University of the Witwatersrand, which promotes accuracy in public debate, testing claims made by public figures around the continent

** The views expressed here are not necessarily those of Independent Media.

Daily News

Margaret Thatcher, public procurement pioneer and advocate?


Spend Matters

By Peter Smith

April 8, 2013

Margaret Thatcher, who died today, was the United Kingdom’s most important politician of the last 50 years. She will be remembered for both her domestic leadership, as she turned round what seemed like a country in inexorable decline through the 1970s, and her role in foreign policy, from the Falklands to supporting Reagan in the “defeat” of the USSR.

But she can also take some credit as one of the key founding fathers (mothers?) of professional public sector procurement. Under her period of office as Prime Minister, 1979 – 90, we saw major advances in procurement throughout the public sector.  As David Smith, Commercial Director at the Department of Work and Pensions, CIPS President last year and someone who was one of the pioneers of public procurement himself, said to us today:

“She was really the first Prime Minister in the UK to take seriously the whole concept that government spending needed to be efficient and effective. She instigated the first government procurement review in 1984, which really led to the Treasury Central Unit on Procurement being formed, more senior procurement staff in departments, and eventually OGC, ERG and all the focus we’ve seen since on public sector procurement”.

She also led the drive to involve the private sector more in the delivery of government services. Now, just like the more divisive side of her achievements on the economic front (miners’ strike et al), you might look either positively or negatively at “compulsory competitive tendering” and “market testing” as the beginning of the whole outsourcing boom and greater private sector involvement in public services.

But if you remember the days of the local authority works’ departments, and their total lack of any customer or VFM focus (and often a dollop of corruption to go alongside that), then it’s hard to argue against her view that competition and procurement had to be taken more seriously if the taxpayer was to receive value for money for an ever-increasing investment.

And as well as being arguably the inventor of public sector outsourcing, it was under her leadership that the first serious Procurement Directors started appearing in government departments. I did my stint as a government CPO not long after she’d moved on, but her influence was still clear in the approach of Ministers like  Peter Lilley and Michael Heseltine, with their support for further innovative procurement initiatives around outsourcing and PFI for instance.

As David Smith said today,

“Whatever you think of her politics, she was a friend of the profession, and a genuine pioneer in understanding the importance of the role in the public sector. Many of the things we take for granted now in public procurement started because of her”.

RIP Baroness Thatcher.

Kenya: Minutes reveal how IEBC bought pollbooks


Standard Digital

By Moses Michira and Paul Wafula

March 26, 2013

NAIROBI, KENYAThe electoral commission, which conducted the March 4 General Election, bought voter identification gadgets without testing their technical capability.

Face Technology, the South African firm that supplied the equipment also known as poll books, won the tender before a technical evaluation was conducted among the five prequalified bidders.

A review of the tendering procedure by the public procurement regulator found out the tender to supply poll books was awarded to the South African firm, which participated in the Anglo Leasing scandal, on September 29 last year, three weeks before the technical evaluation among the shortlisted bidders.

This major procurement breach ensured firms that were to later demonstrate their capabilities for the task, like America’s Avante and France’s Safran Morpho were left out.

The public procurement regulator, however, found out IEBC had actually made its decision to award the tender to Face Technology more than three weeks before the October 22 demonstration of technical capabilities.

Minutes from the Independent Electoral and Boundaries Commission (IEBC and presented by Avante to the regulator indicated that the tender was actually awarded on September 29.

“…bidder number 3 M/S Face Technology be considered for the award of the contract at a total cost of Sh1.397724925 ($16651139.13),” reads part of the official information from IEBC’s September 29 meeting.

The regulator says since a decision had been made, the exercise of proof of concept was meaningless becauseFace Technology, whose devise had failed, had been shockingly declared the winner. The revelation now provides the critical answers to the billion-dollar question, what exactly went wrong in the voter identification during the last General Election conducted by IEBC?

The public procurement regulator fell short of cancelling IEBC’s tender, only allowing it to proceed in the greater public interest considering the time left, on its December 3, last year, terse ruling. IEBC’s defence was that Face Technology had the lowest quote at Sh1.39 billion disregarding its inability to produce the required equipment, compared to Safran Morpho’s Sh1.6 billion and Avante’s Sh2.1 billion.

Questionable tendering

IEBC’s motivation in awarding the tender to Face Technology was questioned by the regulator who established an uneven playing ground in the procurement process. Face Technology had presented a prototype that never worked at the tendering stage, but the IEBC inexplicably offered the firm another chance to demonstrate its technical capability.

A meeting between IEBC and the three prequalified bidders held on October 10, last year indicated Safran Morpho declined to parade its prototype, while Face Technology’s equipment fell short of the requirements in the tender document.

“(Avante’s prototype) can satisfactorily meet the specifications provided in the tender document for voter identification device,” further reads the report. “( Face Technology) did not demonstrate a prototype that met the proof of concept requirements as stipulated in the tender document.”

IEBC invited Face Technology and Safran Morpho in a subsequent demonstration, leaving out Avante, which had demonstrated its technical capacity, in a meeting held on October 22. Minutes of the meeting show Face Technology presented a different device from that submitted during the close of the tender, a major procurement breach, which the IEBC turned a blind eye to.

During the evaluation,Face Technologyprovided a prototype device, which lacked a spare power back-up of 12 hours that was marked as critical. It also did not have an original battery attached to the laptops that would last for 12 hours.

The device it supplied at this stage did not meet the requirement that its start-up and recovery time would last less than 30 seconds. This means the prototype ofFace Technology was taking longer to start than required. None of the companies that qualified for the second round of evaluation also provided gadgets that had unique identification numbers assigned by the manufacturers. Lack of this detail exposes the gadgets to difficulties in tracing the user and location in case they are used to hack into the system. The Board accuses the IEBC of being cosy with Face Technologyand finding small excuses with the other companies to disqualify them.

“It (IEBC) appears to have adopted in the processing of this tender, a scheme of nit-picking, when it came to the tenders of the bidders it did not favour, and one of cosiness when it came with the successful bidder (Face Technologies),” a report, critical of the process, reads in part.

The revelations come at a time when it emerged the electronic voting and transmission system could have been attacked at least twice before it finally crashed at 8pm on Election Day.

Uganda participates in East African procurement forum


The Independent

By Julius Businge

December 5, 2012

The Public Procurement and Disposal of Public Assets (PPDA) Executive Director, Cornelia Sabiiti is leading a team of 19 professionals to a regional procurement forum in Bujumbura, Burundi that runs from Dec. 5 to 7, the procurement body said in a press statement released on Dec. 5.

Over 200 delegates from public, private and civil organisations in the region are attending the 5th East African Procurement Forum being held in Bujumbura.

During the three day conference delegates from Burundi, Kenya, Rwanda, Tanzania, Uganda and South Sudan will deliberate on issues affecting public procurement in the region. The objective of the forum is to serve as a framework that helps participants learn and benchmark with each other on their respective public procurement systems including policies and enforcement measures.

The Ugandan team includes delegates from Civil Aviation Authority (CAA), Uganda Revenue Authority (URA), Uganda National Roads Authority (UNRA), Ministry of Education & Sports, Uganda Management Institute (UMI), Ministry of Health, Kampala Capital City Authority (KCCA), Ministry of Local Government, National Environment Management Authority (NEMA), Uganda Coffee Development Authority (UCDA), Institute of Procurement Professionals of Uganda (IPPU), AH Consulting and the Ministry of Defense.

Uganda will be presenting six papers including a paper on ethics and transparency in the management of public procurement; the contribution of civil society and the public sectors on ethics and transparency in public procurement. Another paper will look at the challenges of an independent regulatory authority.

The Burundi forum comes on the heels of the successful public procurement symposium PPDA held in September 2012 bringing together public and private sector professionals in Uganda.

Senegal’s reforms and red carpets


Africa Report

November 27, 2012

Senegal’s President Macky Sall has slashed government spending to finance new infrastructure projects.

Faced with an audit of Wade-era projects, the opposition says he is playing political games. Dakar has been rolling out the red carpet in recent weeks.

Elected in March on a reform ticket, President Macky Sall is in demand as an interlocutor – whether it is by the World Bank, the UN or France’s President François Hollande, who stopped in Dakar on 12 October en route to his more controversial landing in Kinshasa for the Francophonie summit.

This month, the Mo Ibrahim Foundation is holding its annual development conference in Dakar to salute Senegal’s political achievements.

Dakar’s National Assembly gave Hollande the chance to set out his Africa policy, which he insisted was non-interventionist and non-paternalistic.

Hollande seized the chance for a tête à tête with Sall, seeking his help for the regional effort to tackle the worsening in- security in Mali.

Senegal’s troops, alongside Ghana’s, are regarded as the most professional in the region.

But Sall has plenty of local problems to tackle – such as the perennial rainy-season flooding.

The government’s failure to invest in flood defences was one of the reasons for voters turning against former President Abdoulaye Wade.

In September, Macky Sall pushed through a bill to abolish the Senate, the second chamber in the National Assembly.

He promised that the 767bn CFA francs ($1.5bn) would be used to finance a 10-year plan for effective flood defences, storm drainage and sanitation.

Opponents to Sall’s plan accuse him of partisan plotting.

The Senate was dominated by members of Wade’s [I]Parti Démocratique Sénégalais[/I].

But Sall’s supporters insist the plan reflects the need to cut ballooning government overheads inherited from the Wade era.

The Sall government aims to cut the budget deficit from current levels of 7.4% of gross domestic product down to 4% by 2015.

So far, Sall has closed 59 moribund state institutions, banned first-class travel for civil servants and is selling a presidential jet.

To promote accountability, Sall has published details of all official salaries, declared his own assets and promised to cut salaries at state-run companies to below 5m CFA francs per month.

“Humility, sobriety and rigour should govern our politics,” Sall told The Africa Report’s sister magazine Jeune Afrique after his election.

“I assure you that there will be a profound break from the practices that were in force under my predecessor.”

The new government has quickly launched audits of government departments and projects for evidence of illicit disbursements.

This includes projects run by Wade’s son Karim, such as the 650bn CFA franc energy crisis programme, Plan Takkal.

Britain, France and the United States have pledged cooperation in tracking down stolen money.

Sall rejects claims of political vindictiveness: “The only thing that interests us is that the errors of the past don’t repeat themselves,” he said.

The courts will take cases identified by the audit.

His promise to cut the presidential term from seven to five years with immediate effect won local and international plaudits, as did his agreement with the African Union to set up a special tribunal for Chad’s ex-leader Hissène Habré, in exile in Senegal since 1990.

Canceling Out The ‘Background Noise’ On Egypt-Israel Relations


Minnesota Public Radio

by Dana Farrington, National Public Radio

April 29th, 2012

By ending a historic gas contract with Israel, is Egypt laying the groundwork for a fundamental shift in relations? Not quite, says Rob Malley of the International Crisis Group.

Malley, program director for the Middle East and North Africa, talks to NPR’s David Greene on Weekend Edition about last week’s announcement, which raised questions of political rifts. Malley says:

“What we’re seeing right now is a lot of noise, but no real change, partly because — if not essentially because — both the Israelis and the Egyptian security establishment believe that the relationship is critical for both of them.”

Israel and Egypt signed the historic Camp David peace treaty in 1979, and The Associated Press reports:

“While relations have never been particularly warm, the quiet border has been critical for the security of the two neighbors. Egyptian energy exports to Israel and other business ties have helped keep the peace.”

NPR’s Sheera Frenkel reports for Weekend Edition that the gas deal was signed in 2005 and intended to last for at least 15 years. Reuters calls it “the most significant economic agreement to follow” the 1979 treaty and Jordan’s treaty with Israel in 1994.

Israel has been getting about 40 percent of its gas from Egypt, according to the AP, yet Egypt said last Sunday that it was ending the gas contract. Government spokespersons in both Israel and Egypt are trying to downplay the issue as a dispute between two companies rather than a threat to the peace treaty, Frenkel reportsRead more.

‘Libya’s oil deals need to be transparent’


Pie chart of world oil reserves by region
Image via Wikipedia

Guardian

Sitting on Africa‘s largest oil reserves, one can expect foreign oil companies to be beating a path to its door clamouring for contracts. But campaigners urged the National Transitional Council (NTC) to refrain from any new oil concessions until an elected government is in place to avoid perceptions of a Libyan “oil grab”.

“Any deals at this time could raise concerns within Libya that international support for the NTC is driven by a desire for access to oil rather than for the benefit of the Libyan people,” said campaigning group Global Witness. “The NTC is likely to have to honour Gaddafi-era contracts in order to get oil revenues flowing. But no new deals for the exploration or exploitation of oilfields should be considered until an elected government can review existing rules and laws to ensure robust transparency and accountability.” Read more.

Nigeria: BPP vows to end contract fraud at Foreign Ministry


Author: Chippla Vandu. Scanned from original N...
Image via Wikipedia

AllAfrica.com

August 18, 2011

Romoko W. Ahmad

The Bureau of Public Procurement (BPP) has vowed to end the loss of millions of naira annually going to private pockets during awards of contracts especially at the Ministry of Foreign Affairs.

BPP’s Director-General Dr Emeka Ezeh said this yesterday during a workshop to sensitise staff of the ministry on the need to be prudent in the award of contracts and purchase of office equipments.

Ezeh, who was represented by Engr Nnebolisa Emordi, accused contractors of sharp practices, adding that the rate of corruption in the federal civil service has become worrisome.

The bureau also expressed fears that ministry officials, just like other government agencies, seem comfortable continuing the ugly trend despite years of signing the Public Procurement Act into law since 2007.

A good number of procurement officers of MDA’s are daily scuttling the efforts of the Bureau through collusion with contractors, tampering with bids to favour some contractors as well as causing an undue delays in the procurement processes when they notice that their preferred bidders are not favoured,” he said.

He said staff of the ministry who go against approved public procurement rules should hurry to reserve a place for themselves at Kuje Prisons.

South Sudan: World Bank initiates new procurement tool


de Südsudan en Southern Sudan ru Южный Судан
Image via Wikipedia

Sudan Tribune

By Julius N. Uma

February 19, 2011 (JUBA) – South Sudan plans to introduce a new method of procurement in the civil service, in the soon to be independent region, to address bottlenecks in the process.

The new tool, dubbed Procurement Value Chain Analysis (PVCA), was introduced at a one-day workshop by the World Bank 14 February, which was attended by 35 officials from the southern government.

Sudan’s South is due to become independent in July after a referendum at the beginning of the year.

During the workshop, held at the World Bank premises in Juba, the participants used the PVCA toll to detect the procurement constraints government officials usually experience while implementing the World Bank-administered Multi-Donor Trust Fund for Southern Sudan (MDTF-SS)…Read more.

Blog at WordPress.com.

Up ↑

%d bloggers like this: