03 April 2024

Caption: It can no longer remain an assumption and that if there are regulation by the state, that effective implementation will happen.

The following three-part article is written by Vishaal Lutchman, Vice President of the South African Institution of Civil Engineering (SAICE). This is Part 2.

…continued from Part 1.

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.

Continued in Part 3…

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