By: Gary Pienaar

Open a newspaper on almost any day of the week and you’ll find a comment like this: South Africa’s current procurement system is designed merely to promote ‘a growing band of BEE billionaire brigands allowing their name to be on the stationary of listed companies for lots of money’. Certainly, that is the view of a blogger in response to a recent question posed by Reg Rumney. 

Rumney was asking the (rhetorical) question whether ‘fronting’ (the practice of white-owned companies window dressing their shareholding, boards, management structures or sub-contractual relationships in order to score preference points that would secure them government tenders) is a legitimate form of black economic empowerment.

A related scenario he described is where a genuinely black-owned company wins a government tender without any demonstrable experience, expertise or capacity and promptly sub-contracts the deal to a white-owned company at a discounted price. These problems have arisen because the legal framework for public procurement currently allows what Rumney calls a ‘rent’ (i.e. a higher tender price) of between 10% and 20% for enterprises where ‘historically disadvantaged people’ play a relatively more significant role. 

These are merely some of the fairly simple ploys adopted by both black- and white-owned businesses to circumvent government’s affirmative action policies applicable to commercial relationships with the state, as contained in the Preferential Procurement Policy Framework Act (PPPF Act, No. 5 of 2000) and the Broad-Based Black Economic Empowerment Act (BBBEE Act, No. 53 of 2003).

Others have expressed similar concerns about the problems collectively described as ‘fronting’, and about manipulation of tenders more generally. For example, then-Public Works Minister Stella Sigcau several years ago signaled government’s growing frustration with and intolerance of tender manipulation and non-compliance with its BEE objectives. 

These practices represent an unknown proportion of the problems that continue to bedevil the beleaguered public procurement system, but they are a dimension of the problem that generates a disproportionate amount of resentment. Tender corruption extends far beyond the field of black economic empowerment and, clearly, not are all BEE deals corrupt. Similarly, not all procurement corruption has a narrow political party motivation: ordinary greed plays its usual part. Neither are government’s broader transformative political and economic goals inappropriate.  On the contrary, most South Africans are generally supportive of the inclusive goals introduced into the public procurement process. Indeed, if the public discussion is any measure, they want its transformative and financial objectives to be achieved more effectively.

But in the post-Apartheid South African context, race, class, money and politics often combine to reflect some of our most debilitating weaknesses. These factors consequently provide the context for much of the discussion here. And it is these factors that, together, threaten the integrity of our democratic ideals.

‘Procurement corruption’ was published in the New Agenda (Issue 31 Third Quarter 2008).