The state of disaster regulations’ procurement shortcomings

The recently gazetted state of disaster regulations for the electricity crisis needs reinforcing if they’re to prevent looting.

The recently gazetted regulations intended to clarify the state of disaster declared for the electricity crisis are inadequate. 

The regulations focus on a range of areas, including procurement, granting loadshedding exemptions to critical services, and exempting power stations from environmental regulations in certain instances. 

From a procurement and accounting perspective, details are scarce. 

The regulations note,” Accounting officers must take steps to ensure that anti-corruption measures are implemented during emergency procurement.” However, what the measures are is not detailed.  

“We will be issuing a media statement in the coming days - and we raise concern in it about this and other vague provisions such as the reference to monthly reporting, which - while vital - must be far more explicit in as far as the contents, format and openness,” says Zukiswa Kota, programme manager at the Public Service Accountability Monitor.

“The principles of monitoring and reporting in and of themselves are crucial, but where too much is left to the discretion of officials and or political heads, this is not likely to meet the demands of a crisis context. If anything,  this dilutes the efficacy of the regulations and enhances the scope for misuse.” 

What constitutes an emergency? 

“Concern definitely arises from the expansive terms in which the regulations are couched. The determination of ‘emergency’ conditions is weak, and the framing of regulations creates room for entities to use the guise of emergency in a wider range of contexts than would otherwise be the case,” says Kota. 

“In addition to increasing electricity generation capacity, prolonging essential services and maintaining critical infrastructure - public institutions are also permitted to do what they deem necessary to minimise the impact of load shedding on livelihoods, communications etc. which, in the current clime of weak accountability is effectively ‘permission to plunder’.”

Bernard Agulhas, who served as audit specialist on the Zondo Commission and is the former CEO of IRBA, points out that there is provision in the regulations for cabinet ministers to issue directions. 

“The regulations will only be sufficient if the further directions/directives will be issued which address details not in the regulations,” says Agulhas.

 “In its current form, the regulations might not be sufficient.”

A history of looting

“Procurement in the public sector is currently one of the high-risk areas as demonstrated in the reports from the Zondo Commission and in the current environment where corruption is rife,” says Agulhas.

There is also a history of corruption during the Covid State of Disaster. “Covid highlighted how easily procurement during a state of disaster can be abused thanks to gaps in decentralised procurement, where departments could deviate from price points set by Treasury, and procurement officers having more discretion,” says Kota.

Kota points to the case of the supply chain management chief director at the Eastern Cape Department of Education, who allegedly received a Mercedes-Benz V-class in exchange for a R4 million PPE tender.

Auditor General oversite will be crucial 

The regulations state that, “The Auditor-General shall conduct real time audits and report on the accounts, financial statements and financial management of all emergency procurement undertaken during the national state of disaster.” Kota notes this real-time monitoring as a critical contribution the Auditor General’s office can provide. 

The Auditor General will need to pay specific attention to procurement transactions and keep in mind the material irregularities provisions, according to Agulhas.

“In terms of this provision, accounting officers can be held liable for losses incurred by the entity and provides the Auditor General with powers to recover such losses from the accounting officer.”

Auditor-General, Tsakani Maluleke, addressed the Auditor General’s oversight role while responding to questions by Parliament's Standing Committee the Auditor-General last week.”

“It’s still early days, we’re currently still with stakeholders.“As things stand, we don’t yet have the plan.” Maluleke said, “Once we’ve engaged with stakeholders, as the audit office we will shape our own intervention by how we assessed the risks and the resources we’re able to deploy.”  

Maluleke emphasised that the Auditor General cannot be the only safeguard. “This crisis reminds us again that the journey of safeguarding these resources is not one that one institution can deal with”

“The point I’m making is that accounting officers need to be reminded of their own responsibilities, internal audit needs to be shifted into action,” Maluleke told parliamentarians.

Parliament is another safeguard, but will accounting officers comply?

The regulations require accounting officers to report any procurement done under the emergency provisions to Parliament within the month. They also need to include details and reasons for the deviations.

However, it remains to be seen if accounting officers will make these reports. A presentation to the Standing Committee on Appropriations last month raised concerns as to the diligence of accounting officers when it comes to reporting around procurement.

Under a new instruction note issued by Treasury, accounting officers at government entities now have the prerogative to approve deviations or contract modifications. Prior to the new instruction note, Treasury granted approval. However, accounting officers are required to report deviations and modifications to Treasury. 

Treasury has noted a massive decline in reported contract modifications and deviations. The top 20 entities reported R8,2 billion in contract deviations in the third quarter of 2021. 

“However, when the approval is now with the accounting officers or accounting authorities, it drops significantly. There is a R6 billion drop,” Sakhile Manyathi, acting chief director in compliance governance and monitoring in the office of the chief procurement officer (OCPO) told parliamentarians. 

The drop is either due to these institutions requiring fewer deviations or failing to report them. The OCPO is contacting the entities to ask if they haven’t incurred more deviations. 

“So upon receipt of an answer that says ‘no, we did not procure via deviations’. That will be so suspicious because previously, they had a large amount sent to us for approval. 

"Now that it’s approved by them, how is it that the drop will be so significant,” said Manyathi.          

Will the state of disaster do more harm than good?

“If the electricity crisis is indeed a State of Disaster. In my opinion, it would be, then its declaration should not be influenced by the fact that procurement under these conditions will provide opportunities for corruption,” says Agulhas. 

“Rather, the regulations should be powerful enough to prevent the state of disaster being used for corruption and, most importantly, the consequences, should corruption still arise, must be severe.”

Kota says, “Given the risks to the fiscus of either a runaway energy crisis on the one hand - or wide-scale looting under the guise of emergency on the other - this is a difficult question to answer in the absence of clear safeguarding mechanisms.” 

Kota calls for the strengthening of the entire procurement system and the expedition of the draft Procurement Bill and making its development process more transparent to the public.