A review of supply chain management (SCM) in South Africa’s public sector has recommended an increase in nationally negotiated contracts and greater use of strategic sourcing.
The review, carried out by the National Treasury (NT) and the first since 2004, said over the next three years the government “will accelerate the centralisation of common goods and services” and national contracting should “result in significant savings”.
In a report the NT said the government’s approach to procurement was “rules driven” and “there is a need to identify more intelligent ways for procurement to realise value for money, create opportunities and promote beneficial change” through strategic sourcing.
The report also said a draft Supply Chain Management Bill was being prepared which will “fully establish the office of the chief procurement officer”, giving it powers to prescribe how goods, services and works are contracted nationally, regulate bidding and contracts and sanction non-compliance with procurement policies. The CPO will also “oversee use of procurement for socio-economic transformation”.
The NT said the public sector spent R500 billion in 2013/14 that “when spent wisely and efficiently can be a great force for good”.
The report said there were problems with people working in the public sector who “do not understand the strategic importance of SCM”, the roles and responsibilities of “technical staff and political officer bearers are not clearly defined” and there was a challenge to find the best balance between “use of procurement as a means of development” and “buying goods and services at the best price”.
The NT said nationally negotiated contracts would be expanded to cover areas including IT, totalling R10 billion of spend a year, professional services (R12 billion), travel (R5 billion) and telecoms (R3.2 billion).
Lungisa Fuzile, director-general of the NT, said: “Traditionally, SCM has been misunderstood and undervalued. Its strategic importance has not been recognised, and it has been under-capacitated.
“The negative effects of inefficient public sector SCM, particularly in the procurement phase of the chain, are well documented. Suppliers charge excessive prices; goods and services contracted for and delivered are of poor quality and unreliable; and there is corruption and waste.
“In South Africa, government is starting to value the strategic importance of SCM to service delivery, value creation, socio-economic transformation and fiscal prudence.”