How is this for a truly depressing statistic from the World Bank? This graph, taken from global research on integrity in public procurement, shows that surveyed governments in sub-Saharan Africa had the second most instances of bribery in procurement functions after countries in South Asia.
In fact, Southern African countries - and that includes South Africa - fared worse than Latin American countries which are infamous for their levels of bribery and corruption.
The Organisation for Economic Co-operation and Development reports that of all government activities, public procurement is most vulnerable to corruption. [1]
Even in most First World countries, bribery by international firms is more pervasive in public procurement than in utilities, taxation, or judiciary. As public procurement is a key economic activity of governments, estimated at around 15% of GDP, this has a major impact on how taxpayers' money is spent.
Following damaging expos'es of corruption in procurement and subsequent public condemnation, governments all around the world, from Malaysia, to the US, to China and India, are tightening up their procurement processes and controls and launching initiatives to fight bribery and corruption.
Shades of grey
Public sector procurement scandals inflict more than just financial damage.
Paul Maddison is MD of Realyst
There have always been grey areas throughout the public procurement cycle that provide opportunities for graft, and these grey areas are mirrored in the private sector.
However, public sector procurement scandals inflict more than just financial damage. Since public funds are at stake, taxpayers get extremely irate at this type of dishonesty - especially in an economic downturn - and as a result personal as well as political reputations are threatened.
The South African government, having taken cognisance of the problem, has put in place a supply chain framework document that lays down the rules for public procurement.
The Public Finance Management Act of 1999 spells out the roles and responsibilities of officials in charge of procurement. They also have a series of rigorous procurement and supply chain management polices to encourage fair tender processes, promote BEE, stop dishonesty and ensure the competence and delivery capability of government suppliers.
However, that is not enough to address the "grey areas" in the procurement cycle, which more often than not falls in the ambit of the practical application of regulations and guidelines to the practice of procurement. The public sector needs robust contract management systems to adhere to legislation and prevent opportunities for long-fingered officials.
Ensuring transparency
These criteria are also driving private sector enterprises to reassess their procurement practices. A 2007 report from the Aberdeen Group states that the top three factors driving enterprises to focus their resources on contract management are: pressures to better assess and mitigate risks from suppliers and customers (42%), pressure to improve procurement and supply management (28%) and regulatory and reporting requirements (28%). (Contract Lifecycle Management and the CFO.)
A contract management system allows for the automation of different stages of the tender process. It creates a visible, accessible central repository of all contracts and related documents. Most importantly, it contains checks and balances to ensure valid pricing.
Pessimists might say human beings are prone to acts of dishonesty. But therein lies the benefit of using an automated contract management system: a computer does not lie and cannot accept a bribe.
[1] Directorate for Public Governance and Territorial Development, Integrity in public procurement: Good practice from A to Z.
* Paul Maddison is MD of Realyst.
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