COVID-19: R500bn and the case for procurement reform
On 24 June next week Finance Minister Tito Mboweni will table the special adjustment budget. This budget will change the allocations made in the existing budget tabled in February this year to help fund government’s ongoing COVID-19 response plan.
Through re-allocations in this special adjustment budget, Mboweni will have to find R130 billion of the R500 billion COVID-19-relief package announced earlier by president Cyril Ramaphosa. These adjustments in the new budget will among others see R20 billion allocated to provinces to help fund healthcare and other front line services for the COVID-19 response.
With such large sums of money being shifted around and spent in a time of crisis, calls are increasing for more to be done to safeguard public money against potential looters.
The multi-billion rand support package, a portion of which will come through budget adjustments that will be announced next week, is aimed to help mitigate the impact of the pandemic, especially in poorer communities. It is in the poorer communities where the need for support and services is real, said Aminah Abrahams, a community leader in Manenberg this week during a webinar titled: Our Voices matter, hosted by The Socio-Economic Rights Programme of the Dullah Omar Institute.
Abrahams said she helped 600 struggling community members apply for a food parcel, but only about 50 people (households) received one. The same happened for community members who applied for a COVID-19 relief grant. “Only a few got approval. Many were declined and only got an SMS with no alternatives offered. People are desperate for this money. It is mainly people who used to sell their fruits at street robots. These are people living from hand to mouth and when they are not helped, they ask me if this is a legit thing,” Abrahams said.
It is questions like these – “is it a legit thing” – and given the huge sums of money set aside for the health, social development and economic legs of the COVID-19 response, that have some civil society organisations like the Public Service Accountability Monitor (PSAM) insisting on greater transparency and more safeguards.
The call has been echoed by opposition parties, legal experts, and government itself raising similar concerns that existing safeguards may not be enough and that more needs to be done to ensure monies reach the intended beneficiaries most in need and that those dependent on the public health sector, get the care they need.
Apart from some provincial Disaster Relief Grant funding, provinces had to mainly re-prioritise funds in their existing budgets to fund their COVID-19 responses. Three months into the national State of Disaster, some provinces already spent over a R1 billion on COVID-19 efforts. Details on the who, what, where and how much of this spending has been scant until now with some provinces indicating there will be a proper breakdown of re-allocations and spending in the provincial adjustment budgets set to follow Mboweni’s announcement next week.
Health Spending on COVID-19 in Gauteng
In Gauteng, health spokesperson Kwara Kekana told Spotlight the Gauteng Health department (GDoH) by 3 June has spent R448 million on its COVID-response. Kekana said this was done through a “re-prioritisation process of funds (from District Health Services, Hospital Services and Goods & Services), the Provincial Disaster Relief Grant, and a “cash facility made available to GDoH to enable the department to make commitments subject to the confirmation of the budget by Provincial Treasury”.
She could not give a full breakdown of all items procured and from whom as the department is still compiling and quantifying the amounts. “There are oversight structures in place to oversee the procurement of COVID-19 related supplies, Kekana said responding to questions on oversight measures to ensure spending is done within the prescripts of the law. “There is a committee headed by the DDG Supply Chain from Gauteng Provincial Treasury responsible for oversight of the procurement function and there is a procurement committee in the department chaired by the CFO that is responsible for making recommendations to the head of the department,” Kekana said.
Last month, however, the CFO in the Health Department, Kabelo Lehloenya, resigned abruptly, leaving many questions over the reasons for this sudden departure. Lehloenya was chair of the department’s COVID-19 procurement committee tasked with expediting procurement of goods required for the COVID-19 response.
DA MPL Jack Bloom questioned why the CFO suddenly resigned. “Did she resign out of conscience, or was she implicated in something?” Bloom pointed to rumours on Twitter of alleged tender irregularities over PPE procurement in Gauteng implicating Gauteng Premier David Makhura. “We need a proper explanation. We need to guard against corrupt interests taking advantage of the health crisis to enrich themselves in a department that has suffered grievously from massive corruption,” Bloom said.
Makhura and Health MEC Dr Bandile Masuku, however, dismissed the rumours and allegations posted on Twitter during a press briefing as a “Bell Pottinger-type smear campaign” by those aggrieved at the authorities’ clampdown on corruption.
Kirsten Pearson of the Budget Justice Coalition told Spotlight any CFO has an important role to play in ensuring good governance in a department or entity. “It is to be expected that the public will have tough questions for a department when a CFO departs suddenly from a department where there have previously been issues of mismanagement of funds.”
Health spending on COVID-19 in the Western Cape
Meanwhile in the Western Cape, Head of Health, Dr Keith Cloete, during an earlier media briefing, said the preliminary figures for the province’s COVID-19 response is tagged at around R2,5 billion. Director-General for the Western Cape government, Harry Malila said based on the 2020/21 budget framework the province had to re-prioritise funds for its COVID-19 response. “We’ve started to look at those things that we are not doing and where we do not have to incur expenditure at the moment, for example, we are not travelling at the moment, we are not having major conferences. So some expenditure is not happening in departments at the moment during the lockdown.”
Malila said a lot of expenditure is from current resources and that “will be aligned and adjusted” when the province tables its adjustment budget. He was at pains to stress that shifting funds does not mean nothing is happening with non-COVID-19 related programmes.
Explaining the financial implications of COVID-19 for the province, Malila said all spending on the pandemic efforts in the province thus far, came from the province’s own resources. He said early projections show that just on medical expenditures, “we are talking about R1,5 billion”.
“And it’s not just for health – there is also the issue of PPE. In health it is anything between R800 million and R1 billion. Then we still need to add PPE for schools, so those amounts will grow.” He said for the quarantine and isolation facilities, the provincial cabinet set aside about R300 million. Now, the province is waiting on its allocation (of the R20 billion) from national government for its COVID-19 response – money that is desperately needed.
Health spending on COVID-19 in KwaZulu-Natal (KZN)
In KwaZulu-Natal Finance MEC Ravi Pillay told Spotlight they “are acutely aware of the risks that are already manifesting themselves” (in COVID-19 spending). “We are accordingly monitoring COVID-19 expenditure closely,” he said.
He explained the oversight mechanisms in place especially for the health department in the province due to the higher projected spending. “Weekly expenditure reports are analysed by the Provincial Treasury. These reports are analysed and price variances across similar items are further interrogated. The Auditor-General is working closely with the treasury to ensure that there is audit coverage over most procurement,” he said.
Pillay said the KZN treasury have introduced a programme of “pre-audits for large contracts” and internal audits and internal controls are being strengthened. He stressed, however, that while the provincial treasury has an oversight responsibility, “we cannot take over the procurement responsibility of departments”. “As stated in the 2020/21 Budget Speech, “departments remain responsible and accounting officers remain accountable.”
Unintentionally expose government
Auditor-General Kimi Makwetu in an earlier opinion piece noted “emergency procurement sits at the heart of government’s reaction to the pandemic, and is particularly prone to exploitation”. “The same goes for economic support and stimulus packages.” Makwetu warned that easing controls and streamlining processes to respond to the COVID-19 crisis may “unintentionally expose government to the risk of rampant misuse and abuse of public resources”.
AG spokesperson, Africa Boso, told Spotlight there are “interactions with parliament and government underway” following the AG’s offer to avail expertise to help deal with the challenges posed by the pandemic from “an appropriate financial management perspective”.
Also recognising the need for emergency procurement in responding to the pandemic, some civil society organisations, however, argue more should be done to safeguard public coffers in this time.
Globally the World Health Organisation estimates that between 10- and 25 percent of global health procurement (estimated at $5 trillion per year) is lost to corruption. In South Africa, data Statistics South Africa released last year on the 2017/18 financial year showed health was “the second biggest expenditure item for provincial governments, taking up 32% (R177 billion) of total spending”.
And with billions annually spent by health departments, the Auditor-General has continuously flagged poor financial controls as major concerns in provincial health departments.
“opportunistic operational environment”
It is against this track record littered with poor and wasteful spending that Jay Kruuse, director of PSAM, told Spotlight corruption remains a relevant concern. “We need only look at state capture to get a sense of the extent of the problem,” he said.
Kruuse pointed out that the pandemic has now created a different and “opportunistic operational environment”. “The relief packages,” he said, “came with the relaxation of procurement regulations in supply chain management”. “Recent reports indicate that relaxed supply chain management processes has resulted in price inflations with departments sometimes paying above Treasury benchmarks for essential items such as hand sanitiser,” he explained.
Dr Allison Anthony, Deputy Director of the African Procurement Law Unit, told Spotlight there is no doubt goods and services that have been procured in the fight against COVID-19 have been necessary. “COVID-19 is in fact an emergency for which emergency rules have been created. But,” Anthony said, “emergency procedures are not a way of bypassing procurement rules, or at least they shouldn’t be”. “There are criteria to evaluate whether a situation is an emergency and COVID-19 is one, and should be treated as such. Staying within those margins is what may prove to be challenging,” she said.
“I’m sure after the virus is over we will hear many a story about misappropriation of funds and incorrect spending. However, right now, what is publicly available (procured) seems to be necessary.”
But according to Kruuse, there is a real concern that “maladministration or financial negligence may be identified too late to be rectified”.
Falling short – oversight and transparency
Pearson pointed to poor oversight that along with existing controls fall short of adequately safeguarding public money. “For too long, oversight institutions have not been performing their oversight roles adequately. When the sentinels who are meant to ensure the efficient, economic and effective use of resources fail to play their mandated role, we must insist that they do so,” Pearson said. “The country cannot reverse an entrenched culture of corruption if its many watch keepers are ineffective or lacking in determination to do what they are appointed to do.”
Like the Auditor-General, organisations such as PSAM has been calling for accounting officers who have failed to meet their legal obligations to be held accountable. “[But],” said Kruuse, “the core issue is less with the PFMA and more with oversight failures of key leaders and institutions. This extends to ensuring that legislature oversight is sharpened and authorities such as the OCPO (Office of the Chief Procurement Officer) are strengthened in capacity – not weakened as we are currently witnessing.”
Anthony agreed on the need for stricter oversight. “We often find that in unpredictable circumstances such as these, our laws often fall short of what we need it to be.” Anthony said stringent approvals and strong leaders are also needed in such times. “Especially the latter would be imperative in ensuring that the controls are kept in place and the money spent for the right reasons. [But] in the end,” Anthony said, “if people want to be corrupt, they will be, no matter how tight or how flexible the rules are”.
“It’s a human problem, not a systemic problem.”
“I think a constant reminder to our leaders that they have a very big responsibility is important,” Anthony said. “ But even more important is for us as the citizens to hold the leadership accountable and to not waiver in that responsibility of ours. Yes, they have a responsibility towards us but we also have a responsibility to ourselves – to make sure that the country is run in a way that complies with the Constitution.”
“The lack of consequences and consequence management in government and other entities that engage in procurement runs in the higher levels of leadership and not only amongst practitioners. Once we start applying or implementing the constitutional principle of accountability, it will already be a huge step in the right direction,” she said.
To hold those in charge of state coffers accountable, however, depends on the availability and quality of information the public has access to. This is why many civil society organisations are calling for more transparency and procurement reforms.
“There’s a need to institute reforms to the national procurement system that entrench transparency, citizen participation and monitoring throughout the contracting cycle,” said Pearson. The Budget Justice Coalition is among organisations that has called on Treasury and Parliament to ensure that procurement and contracting data is timeous made public.
“We need far greater transparency and real-time access to where, what, to whom and how much money is actually being spent on health service delivery during actual expenditure or budget implementation periods,” Kruuse said. “There is a strong case to be made for reforming current data management and procurement reporting towards more transparent, national systems linked to centralised databases,” he said pointing at successes in countries like Brazil and Mexico.
Pearson agreed that real time access to spending information can make a difference. “For a very long time, only a small percentage of public procurement and contracting information has been published in the public domain. Despite what the Constitution says, departments simply don’t publish all the procurement information. This means that a lot of financial mismanagement is concealed until it comes to the audit process,” she said.
Pearson said provincial treasuries should explain how they are ensuring that procurement is being managed effectively and why provincial health departments aren’t already regularly publishing the full range of procurement and contracting information.
“Real time monitoring has been sorely lacking.”