“Current Trends in public procurement in KZN”
Kwa-Zulu Natal Procurement Indaba
13-14 August 2015
Adv Siza Mthethwa
Contents
• Mandate and Strategic Objectives • Evolution of SCM in the Public Sector • Critical SCM issues • Possible solutions • Targeted interventions • Previous Spend Trends • Recent Spend Patterns • Current Economic Trends • Existing Public Procurement Strategies • Barriers to Economic Transformation • Recommendations • Conclusion
Mandate and current Strategic Objectives of the Provincial SCM Unit
Broad Mandate
• The Provincial SCM Unit is required to establish and maintain a Strategic link between Financial Management reforms, procurement processes and targeted economic transformation.
Strategic Objectives
• Support and monitor adherence of departments, public entities and Municipalities to SCM prescripts.
• Develop cost reduction strategies for provincial departments and Municipalities.
• Provide a supplier monitoring mechanism for the Province to ensure that Supplier Information is reliable and easier reporting is facilitated.
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Evolution of SCM in the Public Sector
Critical SCM Issues
• Irregular Expenditure as a result of non compliance with SCM Processes
• High number of deviations due to lack of planning
• Poor Planning
• Poor spend on infrastructure grants, thus leading to deviant practices in SCM in attempt to speed up the processes
• Almost non-existent Contract Management (not even contract registers in place)
• Inadequate number of period contracts
• Poor level of skill of SCM officials
• Limited targeted procurement
Possible Solutions
• Predominantly guided by the establishment of the Office of the Chief Procurement Officer at National Treasury: – Extensive legislative reforms
– Further standardisation of bidding documents
– Strategic Procurement
– Conducting Spend Analyses (enhance understanding of the environment)
• The Provincial SCM Unit seeks to augment the national developments by embarking on a number of special interventions to deal with province-specific challenges.
o Contract Management • Phased-in approach that includes compiling of contracts registers; then the next
phase of assistance will be the conducting of reviews for existing contracts.
o E-Procurement Tool • Automation of the SCM process not only to create efficiency but also create a
system that will generate an audit trail. It will be integrated with the existing suppliers’ database.
o Capacity Building • National Treasury, in partnership with the Chartered Institute of Purchasing and
Supply (CIPS) are creating targeted public sector SCM qualifications
o Transversal / Period term contracts • Frequently procured goods will be on contract to alleviate the workload on SCM
officials in Departments and also enhance transparency and promote empowerment.
Targeted Interventions: Special Projects
Previous Spend Trends
o In 2007/2008, Spend analysis demonstrated that 93% of the suppliers registered on the Suppliers database shared 20% of the Province’s procurement spend. Therefore 7% shared 80% of the procurement spend.(www.ilo.com)
-
2 000
4 000
6 000
8 000
10 000
12 000
14 000
16 000
5% of Total Budget 15% of Total Budget 80% of Total Budget
Number of Suppliers per Budget % Threshold Category 2005/06, 2006/07 & 2007/08
Number of Suppliers per Budget %Threshold Category 2005/2006
Number of Suppliers per Budget %Threshold Category 2006/2007
Number of Suppliers per Budget %Threshold Category 2007/2008
Recent Spend Patterns
• Similarly if we were to examine the spend per race group as at the 2013/2014 financial year, one would note that the previously disadvantaged groups are not enjoying a major percentage of the spend.
30%
1% 0%
33%
2%
34%
2013/2014 Expenditure
African
Asian
Coloured
Indian
Other
White
Current Economic Trends
• As at May 2015, the following graph demonstrates the performance of the Top 50 suppliers in the Province who receive almost 50% of the estimated R 24 billion allocated to Goods and Services. (Provincial Treasury 2015)
R 0
R 5 000 000 000
R 10 000 000 000
R 15 000 000 000
R 20 000 000 000
R 25 000 000 000
R 30 000 000 000
12014/2015
Top 50 Suppliers
Total Spend Top 50
Total Budget
Existing Public Procurement Strategies
• In KZN, the Department of Education recorded contracts of R1.8billionin the 2011/12 financial year that were awarded to emerging contractors as part of its NSNP and LTSM initiative and infrastructure projects.
• The Department of Transport has databases for contractors that are part of the Vukuzakhe development . Once again, designed as poverty alleviation programmes and therefore do not comply with SCM prescripts.
Barriers and Conflicts to Economic Transformation
• Legal and Policy Frameworks (prohibition of set asides)
• No Link between business stakeholders and procurement drivers.
• Lack of a strategic approach to targeted procurement.
• Limited understanding of government spend and associated industries.
Recommendations
• Policy Frameworks to be developed to implement sustainable work opportunities for social enterprises as part of local economic development programme.
• NT should conduct a thorough review of the SCM Legal and Policy Frameworks to incorporate an exemptions for :
(i) Prohibiting set asides for procurement that have a social impact, and
(ii) competitive bidding processes for procurement that has a social impact.
• Unique Policy framework for emerging enterprises that simplify procurement processes.
(Potential Measures that can be taken to use Public Procurement to Stimulate the Social Economy in South Africa – Review of Legal and Policy Framework, ILO and DEDT, 2013)
Recommendations
• Spend analysis should be conducted to determine industries for public procurement opportunities, such as,
(i) catering, school nutrition (ii) recycling (iii) construction (iv) education/skills development (v) gardening (vi) community services (vii) waste management (viii) agriculture (ix) health care (x) security (xi) road maintenance • A separate Database for emerging enterprises, which allows for pre-approval and
registration.
(Potential Measures that can be taken to use Public Procurement to Stimulate the Social Economy in South Africa – Review of Legal and Policy Framework, ILO and DEDT, 2013)
Recommendations
• Strategic Sourcing, whereby Provincial Treasury will facilitate transversal contracts for commodities and services offered by emerging service providers. (TR 16A6.5 and TR 16A6.6)
• Training to be provided to SCM practitioners to facilitate such initiatives.
• Monitoring and evaluation to ensure targets are achieved with respect to each participating institution to ensure sustainability of emerging businesses, service delivery and compliance.
• A reporting tool to be designed to report on achievements.
(Potential Measures that can be taken to use Public Procurement to Stimulate the Social Economy in South Africa – Review of Legal and Policy Framework, ILO and DEDT, 2013)
Conclusion
There is a clear need to identify strategies as recommended herein that balance the interests of service delivery, governance and economic empowerment in such a way that they serve to equally complement the other. Great is our task at hand!!
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THANK YOU!