Public sector employees are still feeding off the state
BUSINESS LIVE / 18 APRIL 2018 - 06:01 / LINDA ENSOR
A Treasury report cites R8bn paid to 2,349 businesses involving state employees, which the DA calls ‘shocking’ and a ‘gross violation’ of the Public Service Act
Public-sector employees continue to do significant amounts of business with the state despite it being prohibited because of the conflict of interest involved.
An amount of R8bn was paid to 2,349 businesses in which state employees were involved between April 1 2017 and end-January 2018. Picture: ISTOCK
An amount of R8bn was paid to 2,349 businesses in which state employees were involved between April 1 2017 and end-January 2018. These suppliers had 2,704 state employees listed on the government’s central supplier database as owners, directors or non-executive directors. They were employees of national and provincial governments, some municipalities and three public entities.
The figures were disclosed in a report by Treasury on state employees conducting business with government as at February 2018, which was tabled in Parliament by Finance Minister Nhlanhla Nene.
A total of 28,427 state employees were registered as owners, directors or non-executive directors of businesses on the database, which is operated by the Office of the Chief Procurement Officer.
"It is safe to say that the numbers of employees identified to be owners/directors/non-executive directors of suppliers conducting business with government are understated," the report said.
This was because the analysis only related to R124bn of government expenditure out of an estimated R938bn. Only 90% of all state employees were available for validation. Furthermore, the report noted that, contrary to Treasury instructions, R22bn of national and provincial expenditure was awarded to 33,3847 suppliers not registered on the central supplier database.
'Gross, shocking violations'
The DA’s MP on the standing committee on public accounts David Ross said the statistics were "shocking" and in "gross violation" of the Public Service Act and Public Service Regulations. He said public servants doing business with the state were given a deadline of January 31 2017 to either resign from the public service or relinquish their business interests. In addition, the Public Administration Management Act compelled state employees to disclose their financial interests.
"President [Cyril] Ramaphosa and his executive must take urgent steps to deal with the culture of lawlessness that has become pervasive in state procurement, in open defiance to government employee ethical conduct," Ross said.
The Treasury report noted that "a culture of non-compliance in supply-chain management is prevalent across all spheres of government with little or no consequences." It complained that the Office of the Chief Procurement Officer had not received adequate support from organs of state to ensure complete employee records were available to verify the state’s payroll information.
However, control over government employees doing business with the state was strengthened by the introduction of the central supplier database in April 2016. This allows for the owners and directors of suppliers registering on the database to be checked against the register of government employees. Currently, the employee information for only 141 of the 257 municipalities (55%) has been captured. A total of 1.647-million state employees have been validated on the database.
Treasury also tabled a report on the state of procurement in national and provincial departments that revealed the government had exceeded its target of spending at least 30% of its total procurement expenditure on small-, medium-, and micro-sized enterprises (SMMEs).
According to a Treasury analysis of procurement on the central supplier database, 38% of the expenditure analysed was spent on SMMEs in 2016-17 and 52% in the period from April 1 to end-December 2017.
Another conclusion drawn from the analysis was that the government had achieved a major shift in spending towards suppliers classified on Levels 1 to 4 on the broad-based black economic empowerment (B-BBEE) scorecard. A total of 67% of analysed expenditure benefited this group.
Total spend on black owned firms was R59.5bn (34%); on black women it was R18.2bn (10%); on black youth R8.3bn (5%); on black rural and township businesses R5.3bn (3%); on black military veterans R496m; and on disabled black individuals R244m. Black ownership could not be confirmed for R93.9bn (53%) of the analysed expenditure.
The analysis focused on spending of R177bn in 2016-17 and R95bn in 2017-18, which the Office of the Chief Procurement Officer believed was "a fair, accurate and representative aggregate view of public service procurement expenditure". The R177bn involved 82,952 suppliers registered on the central supplier database.
A total of R938bn was spent on goods and services in all three spheres of government in 2016-17. There were 621,423 suppliers registered on the central supplier database as at the end of December 2017.
Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER