Accountants fail to stop budget failures like Medupi, MPs say

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  • The national treasury has told parliament that the legislative restrictions are hampering the crackdown on corrupt suppliers.
  • The Treasury says accounting officers in state bodies need to do more to ensure that errant companies are re-registered.
  • Deputy Finance Minister David Masondo said failure to do so contributes to cost overruns like those seen in the construction of the Medupi and Kusile power stations.

The National Treasury told parliament on Wednesday that legislative restrictions were hampering the sanctioning of shoddy and corrupt suppliers in government tenders, meaning more projects could face the risk of disastrous cost overruns.

The Treasury informed Parliament’s Standing Committee on Public Accounts (SCopa) of the procedure for blacklisting companies that have been involved in embezzlement or irregularities in the context of their commercial relations with the State.

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The Treasury said that under the Public Financial Management Act as well as the Municipal Financial Management Act, the mechanism that allows a company that fails to deliver, or is found to be corrupt, is supposed to to be blacklisted again for no longer serving the state – but an accountant is needed to support the blacklisting.

Throughout the meeting, Scopa MPs cited examples of procurement that was either riddled with cost escalations, corruption or poor delivery. These included the controversial cost overruns at the Medupi and Kusile power stations and the Beitbridge border post.

The Special Investigations Unit (SIU) was also present at the briefing and told Scopa that over the past year it has referred more than 500 irregular tender cases to the provincial and national departments to determine whether companies and their directors should be blacklisted. business with the government.

Finance Minister Enoch Godongwana was at a Cabinet meeting and was unable to attend the Scopa session, but his deputy David Masondo said companies should generally be blacklisted for engaging in abuse. corrupt activities or when a court declares them blacklisted.

Failure to do so could cost South Africa much-needed investment, he said.

Corruption a “major problem”

“Individuals in the private sector and the state have engaged in corrupt activities. Corruption is a major problem in the country as it deprives the poor of services and discourages investment. If investors know they will have to bear a cost to invest in South Africa, they just won’t invest,” Masondo said.

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Masondo said the Medupi and Kusile construction program at Eskom was “a classic example” of how poor project management created cost overruns that opened the door to corruption, contributing to skyrocketing the entity’s debt from R255 billion in 2014 to R450 billion in 2019.

“If a business is created yesterday and gets a tender today, it kills entrepreneurship. Blacklisting deters this corrupt activity and drives competition. There are instances where poor performance of a company are due to poor project management,” Masondo said.

Masondo said accountants in various departments and public entities should take responsibility for doing well with suppliers who served the government well, adding that failure to pay suppliers on time created financial hardship for companies.

“We need to punish accounting officers who don’t pay companies within 30 days. Companies have gone bankrupt because we left the stipulation to pay within 30 days to the whims of accounting officers who didn’t follow through with that. I would ask members to seriously consider this challenge,” he said.

The Special Investigative Unit’s chief lawyer, Andy Mothibi, said the unit was investigating corruption, irregularities and project mismanagement, and included those findings in recommendations for consequence management and a possible blacklist.

Regarding the Beitbridge border post, Mothibi said: “The Special Court yesterday had a case between the SIU and Caledon [River Properties] on the Beitbridge border project. We found that there were gaps in the quality of the fence, and we reviewed and submitted proposals and recommendations for a blacklist in this case.”

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Wanted: more teeth

National Treasury director-general Dondo Mogajane said while the department championed high procurement standards, it was limited in its ability to ensure state bodies effectively blacklisted errant companies or their administrators. and owners so that they never serve the state again.

“We have to be informed and the work has to be done by the department. Accounting authorities and accounting officers have a vital role that they play in terms of sanctions and blacklisting. The law does not give any blacklisting powers to the Treasury national. We can only recommend,” said Mogajane.

Mogajane added that there were gaps in the current legislation. He said the government should be more proactive in ensuring its consequence handling is improved because “if you expect an accounting officer to come forward and report themselves, they won’t”.

Mogajane said the Treasury must be allowed to immediately sanction companies and their directors whenever they are responsible for irregularities, non-delivery or exceptionally poor service, as the current legislative framework limits the National Treasury in this regard.

Masondo also told Scopa that on Monday the National Treasury arranged interviews with a new chief purchasing officer and the accountant general. He said the National Treasury was close to finalizing the filling of these critical vacancies.

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