More procurement reforms on the way in South Africa

In his budget speech in Parliament on 27 February 2013, Finance Minister Pravin Gordhan indicated further reforms to the public procurement system in South Africa with a particular focus on curbing corruption. He said:

Minister Gordhan delivering the 2013 budget speech

Minister Gordhan delivering the 2013 budget speech

Procurement and combating corruption

Mister Speaker, last year I said to this House that we will continually endeavour to increase the value which government receives for the money it spends.

Let me be frank. This is a difficult task with too many points of resistance! However, we have registered some progress. In the present system, procurement transactions take place at too many localities and the contracts are short term. Consequently there are hundreds of thousands of transactions from a multitude of centres. There is very little visibility of all these transactions. While our ablest civil servants have had great difficulty in optimising procurement, it has yielded rich pickings for those who seek to exploit it. There are also too many people who have a stake in keeping the system the way it is. Our solutions, hitherto, have not matched the size and complexity of the challenge. As much as I want, I cannot simply wave a magic wand to make these problems disappear. This is going to take a special effort from all of us in Government, assisted by people in business and broader society. And it will take time. But we are determined to make progress.

The process for setting up the Chief Procurement Office in the National Treasury has begun in earnest and I shall soon be able to announce the name of a Chief Procurement Officer. A project team seconded from state agencies and the private sector has identified four main streams of work, involving immediate remedial actions, improving the current system, standardising the procurement of critical items across all government and the long-term modernisation of the entire system.

Among the first initiatives of the CPO will be to enhance the existing system of price referencing. This will set fair value prices for certain goods and services. Secondly, it will pilot procurement transformation programmes in the Departments of Health and Public Works, nationally and in the provinces.

National Treasury is currently scrutinising 76 business entities with contracts worth R8.4 billion which we believe have infringed the procurement rules, while SARS is currently auditing more than 300 business entities and scrutinising another 700 entities. The value of these contracts is estimated at over R10 billion. So far 216 cases have been finalised resulting in assessments amounting to over R480 million being raised. The Financial Intelligence Centre has referred over R6.5 billion for investigation linked to corrupt activities.

I fully support Minister Sisulu’s call for appropriate curbs on officials doing business with government. I will complement her initiative by aligning the Public Finance Management Act with the provisions of the Public Service Act.”

These remarks confirm the impression created by the draft Treasury Regulations published late last year, which, in the part dealing with supply chain management, seem to suggest a move back to a more central controlled procurement approach.

New book on African public procurement regulation

In January Cambridge University Press published Public Procurement Regulation in Africa edited by Prof Geo Quinot (Stellenbosch University) and Prof Sue Arrowsmith (University of Nottingham). The book aims to address the shortage of scholarship in the area of public procurement regulation on the African continent and to promote future research. In the book the law governing public procurement in a number of African systems is analysed and key themes relevant to all African states are looked at. Part I discusses the regulatory regimes of nine African systems using a common framework, providing both a focused view of these African systems and an accessible comparative perspective. In Part II, key regulatory issues in public procurement that are particularly relevant in the African context are assessed through a comparative approach. The chapters consider the influence of international regulatory regimes (particularly the UNCITRAL Model Law on procurement) on African systems and provide insights into the way public procurement regulation is approached in Africa. Apart from contributions by Quinot, the book also contains chapters written by Prof Phoebe Bolton and Dr Sope Williams-Elegbe, both of Stellenbosch University. The book is one of the first major outcomes of the work done by the African Public Procurement Regulation Research Unit, established at Stellenbosch University in 2012.

More information >>

Draft Treasury Regulations published

The South African National Treasury has published new draft Treasury Regulations under the Public Finance Management Act 1 of 1999 to replace the current 2005 Treasury Regulations. Included in the new draft is an entire new section (Part 7) dealing with Supply Chain Management and setting out in significant more detail than the current Treasury Regulations the legal rules for public procurement. The draft aims to give more explicit content to the five constitutional principles governing public procurement, namely fairness, equity, transparency, competitiveness and cost-effectiveness. Noteworthy developments are strict rules about tender awards to persons in the service of the state, mandatory participation in transversal term contracts arranged by the relevant treasury and extensive formal reporting requirements of all procurement transactions.

The draft regulations can be found here >>

APPRRU’s comments on these regulations are available here>>

Quinot appointed to Ministerial task teams



Prof Geo Quinot, director of APPRRU, was recently appointed by South African Minister of Health, Dr A Motsoaledi, to two task teams in the National Department of Health focusing on procurement of medial diagnostics and pharmaceuticals respectively. The task teams will advise the Minister inter alia on the establishment of regulatory processes within the Department of Health for future procurements.


Dutch researchers visit APPRRU

Dutch researchers Professor Frank van Ommeren and Mr Niels Jak hosted by the Socio-Economic Rights and Administrative Justice Research Group (SERAJ) and the African Public Procurement Regulatory Research Unit (APPRRU)

 Two Dutch researchers, Professor Frank Van Ommeren and Mr Niels Jak, have spent a number of weeks in November at Stellenbosch University  as guests of SERAJ and APPRRU conducting comparative research into public accountability, governance and semi-public organisations.

Prof Van Ommeren presents his lecture.

Prof Van Ommeren presents his lecture.

During their stay in South Africa both academics presented informative seminars to members of SERAJ and APPRRU. On 7 November 2012 Professor Frank van Ommeren presented a lecture on law and governance in the public domain. The lecture canvassed the law and governance approach as it applies in the Netherlands with the aim of facilitating a comparative discussion. In terms of this approach the law becomes instrumental to the governance of entities performing public functions. Professor Van Ommeren illustrated that public functions are often performed by a wide array of actors which might not necessarily be subject to constitutional and administrative law (such as semi-public organisations, civil society or, in some instances, even private commercial enterprises). If left unchecked, this might lead to an accountability vacuum. This has led to the development of the principles of good governance in the Netherlands. These are principles that would apply to all actions of entities performing public functions, regardless of the public or private nature of such actions. Professor Van Ommeren indicated that these principles can be utilised as a mechanism to promote greater applicability of public law norms, accountability and democratic legitimacy.


Mr Jak presenting.

Mr Jak presenting.

On the same date Niels Jak presented a lecture on his comparative research on the regulation of semi-public organisations in the Netherlands and South Africa. These entities could be described as private bodies exercising a public function (similar to utility providers) and other entities institutionally connected to the state (such as state-owned enterprises). The lecture focussed on the complex regulatory challenges posed by these entities, particularly issues related to the infiltration of public law norms into the private sphere.  Mr Jak examined the regulatory regimes governing these organisations in both countries and drew a number of important conclusions. In particular, he argued that, compared to the Dutch system, the South African regulatory system allows for the greater applicability of public law standards to semi-private organisations.

Professor Van Ommeren presented another seminar on 14 November 2012 on the public-private law divide. The contentious issue of the distinction between public law and private law, as well as the consequences of such a distinction, have been widely debated for decades. Professor Van Ommeren presented the public-private law divide as multifunctional (the divide may be used for multiple purposes) and context dependent (the purpose of the divide may change depending of the specific context). In order to illustrate this point, Professor Van Ommeren discussed the role of the public-private divide in two crucial aspects of Dutch law, namely its use in judicial protection mechanisms (essentially the procedural jurisdictional limits of the Dutch Administrative Court) and the applicability of substantive law standards (either public or private). The seminar was based on Prof Van Ommeren’s published work in this field, including his article with Gerdy Jurgens published in 2012 in the Cambridge Law Journal (Gerdy Jurgens & Frank Van Ommeren “The Public-Private Divide in English and Dutch Law: A Multifunctional and Context-Dependant Divide” (2012) 71 Cambridge Law Journal 172–199).

Professor Van Ommeren is a professor of Constitutional and Administrative Law at the VU University Amsterdam and co-director of the VU University Amsterdam Centre for Law and Governance’s programme on “Balancing Public and Private Interests”, where his research is focussed on government and governance. Professor Van Ommeren has also amassed considerable expertise as a former senior legal counsel at the Department of Legislation at the Dutch Ministry of Justice. He has a special interest in the public-private divide, government and different kinds of governance, such as regulation with limited licenses, governmental contracts (voluntary agreements) and self-regulation. He is widely published in these fields. Niels Jak is a lecturer and PhD candidate at the Vrije University of Amsterdam, where he teaches Administrative Law and Government Corporation Law. He conducts research under the auspices of the VU University Amsterdam Centre for Law and Governance’s programme on “Balancing Public and Private Interests”, with a particular focus on the regulation of semi-public organisations.

Public Procurement: Global Revolution VI Conference, 24-25 June 2013

Registration is now open for Public Procurement: Global Revolution VI Conference to be held in Nottingham, England on 24 & 25 June 2013. This international conference, organised by the Public Procurement Research Group, University of Nottingham and on which APPRRU is a collaborator, will involve in-depth discussion of current trends and new research in the area of public procurement regulation globally. Speakers include academics, practitioners and representatives of key organisations working in public procurement from many different countries. The conference will also include a focus on public procurement regulation in Africa.

More information, including registration, is available here >>

South African Treasury to create a procurement oversight unit

On 23 July 2012, South African Finance Minister Pravin Gordhan announced that the treasury would create an oversight unit on public procurement. The establishment of this oversight unit would be aimed at actively enforcing supply chain management processes and would include the appointment of a chief procurement officer.

Gordhan stated that transactions of a particular size or type may be subject to scrutiny. He further announced that the treasury would develop IT systems which would enable the active monitoring of compliance with financial management requirements. These systems would enable the treasury to access information regarding instances of public procurement.

The move comes after the publication of a recent report by the South  African Auditor-General Terence Nombembe on the results of local government audits. The report found that only 5% of municipal entities had achieved clean audits for the 2010/2011 financial year. The report further identified the lack of competencies and skills, as well as the lack of consequences for poor performance as the root causes of the troubling audit results.

Gordhan emphasised the need for government to demonstrate that poor performance and non-adherence to legal requirements in public procurement would be met with more severe consequences.