Tender processes overhauled at South Africa's SOEs

17 May 2018

Board members of South Africa’s state-owned enterprises (SOEs) will have no role in the evaluation of tenders in the future, it has been announced.

Pravin Gordhan, the former finance minister removed by Jacob Zuma who has returned as the country’s public enterprises minister, has set out plans for the “recapture and restoration” of SOEs.

In a speech to the National Assembly Gordhan referred to “years of abuse of our state-owned companies not only by the Guptas and their associates, but also by other corrupt networks” and said a commission of inquiry would be investigating allegations of state capture, corruption and fraud.

“In future, board members shall play no role in the evaluation and adjudication of tenders. Where there are board tender committees (or such like) these should be dissolved and the function delegated to management. Instead boards (and not just sub committees) must step up and fulfil their important duty in overseeing procurement, to ensure that due process is followed,” he said.

“Directors and employees will be prohibited from doing business with state-owned companies. Government will be reviewing the legislative framework governing procurement at state-owned companies in order to strengthen the controls to prevent corruption.”

Gordhan said “lifestyle audits” of key officials within SOEs, including procurement and supply chain management, “are intended to be completed by the end of the financial year”.

Gordhan pledged to examine how SOEs could be used to promote inclusive growth, investment and the creation of jobs.

He said SOEs must promote transformation through measures like preferential procurement to develop a new generation of black, woman and youth-owned enterprises.

Gordhan cited defence SOE Denel as one of the institutions where evidence of state capture emerged.

“Again, it seems a weak and captured board and executives were intent on facilitating exploitation of the company’s valuable intellectual property to enrich Gupta associates and potentially launder money offshore,” he said.

“In doing do the company flouted the Public Finance Management Act (PFMA) and other legislation.”

Gordhan said the government would be investing R368bn in SOEs over the next three years, of which Transnet and Eskom account for a significant share.

The investment will be directed toward upgrading and expanding the country’s electricity infrastructure and to acquiring and maintaining railroad stock. 

“This will make South Africa a more attractive location for companies to do business (and) will crowd in further investment by the private sector,” he said.

Gordhan returned in Feburary to government when he was appointed by president Cyril Ramaphosa to be minister of public enterprises, taking over from Lynne Brown. 

His role means he will oversee SOEs including Eskom, South African Airways and Denel. 

He had previously earned respect as finance minister during former president Jacob Zuma’s first term between 2009 and 2014, but was fired in March 2017.

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