SA to crack down on tender fraud

27 October 2010

Finance Minister Pravin Gordhan has proposed levying penalties of up to double the value of the contract on those who obtain contracts fraudulently as one of a number of proposed measures to eradicate fraud in public procurement in South Africa.

Presenting his medium-term budget policy statement to Parliament in Cape Town on Wednesday, Gordhan said the National Treasury had been working with other departments to crack down on fraud and corruption.

In a bid to increase the detection of fraud, government departments and agencies would be required to provide specific information to the National Treasury on procurement practices.

“Where necessary, the cash disbursements process of government agencies will be temporarily assumed by Treasury, thereby ensuring that only valid contracts are honoured and government is charged a fair price,” Gordhan said.

Measures to curb tender fraud

Some of the other measures Gordhan proposed to curb tender fraud include:

  • Making public officials who assist in tender fraud liable for the resulting losses incurred by the government.
  • Implementing measures to ensure that officials who have breached the buying rules remain under suspension while an investigation into them is under way.
  • Strengthening tax compliance measures associated with government procurement, including the introduction of a withholding tax on payments made to businesses selling to the government.
  • Revising procedures for the issuing of tax clearance certificates, so that the South African Revenue Service (Sars) can more easily check whether a bidder has the required tax compliance or not.

A total of R25-billion of procurement and tender fraud was currently being investigated by the government, Gordhan said, adding that the government was recently awarded preservation orders worth about R200-million on a Lear jet, a golf course, a holiday home and a hotel, following the arrest of prominent business people and senior government officials.

“As a result of these efforts, Honourable Speaker, we are beginning to see a change of attitude on the part of service providers. In a recent case, a firm which was paid R10-million by a department for work that they had not done, voluntarily returned the money to the fiscus,” he told Parliamentarians.

Improving administrative capacity

Gordhan also outlined further measures to reduce the amount of wasteful expenditure within the government.

He said R12.4-billion budgeted for capital projects in the last financial year had gone unspent, pointing out that the approach included technical support to those agencies and departments that underspent.

The government was also looking at improving administrative capacity to help departments to deliver services more cost-effectively, and called for a new initiative to ensure that funds for training programmes were spent.

With the proliferation of quasi-independent agencies in recent years, he said the government also planned to scrutinise non-departmental agencies with a special focus on staff establishments, remuneration and governance.

He added that IT systems and management consulting services would also be subject to additional scrutiny within the supply chain regulatory framework.

Source: BuaNews