Decentralised procurement fails the state
News reports of the truly diabolical conditions in public hospitals in the Free State (such as those in the Mail & Guardian of July 4) fuel what is becoming an increasingly common refrain: South Africa is a failed state or is tending towards failure. Analyst Moeletsi Mbeki opened this account, and many others have drawn on it. Alex Boraine’s recent book, What’s Gone Wrong? On the Brink of a Failed State, has a double sense of disappointment and a premonition of disaster.
We think we should be cautious of such analyses, however. Writer Jonny Steinberg notes that people have been warning of impending disaster since the union of 1910. We once asked what makes us South Africans; Steinberg might say that it is a propensity to think in catastrophic terms.
The current sense of malaise, however, is not simply a cultural or psychological phenomenon. Definitely, not all is well. Yet the conceptual and political terms we use to describe our situation are often blunt or inappropriate. Instead of failure, the term that best captures the state we are in is “unevenness”.
The performance of government departments and agencies is un-even. Some perform better than others. Some are clearly dysfunctional. Others are struggling along and still others are excellent. The South African Revenue Service is effective, especially compared with the apartheid-era department of inland revenue. As Eskom stumbles and bungles the building of new coal-fired power stations, the department of energy and the national treasury have rolled out an innovative and successful renewable energy programme.
Even within departments, some offices perform better than others. Home affairs is today much better at issuing a passport to South African citizens – but its treatment of foreign citizens remains lamentable.
What makes the difference? The most common explanations speak of “leadership” and a generic appeal to “skills”. In other words, departments performing well are those with good leaders; those performing poorly have, well, poor leaders. A similar argument is made about skills.
These are not really arguments. They are merely descriptions, so generic that they apply anywhere and everywhere. These quick answers also get in the way of a proper appraisal of what is going on. In particular, they draw attention away from the genuinely historic changes that have been happening in the way the South African state is structured and organised.
With the support of the Ford Foundation, a team of researchers at the Public Affairs Research Institute has been trying to understand how various departments in Limpopo procure goods. There is almost no research in this area, probably because it is regarded as a fairly obscure topic. We should care for two main reasons.
First, at least 42% of South Africa’s national budget is spent on the acquisition of goods and services. (Analyst Linda Ensor has discussed a much smaller figure for 2014-2015 –R190-billion, or 22% of government expenditure. Yet this refers only to national departments, which make up only 18% of total government spending). Forty-two percent is a big number. By comparison, the ratio of total procurement to general government expenditure in the 34 states of the Organisation for Economic Co-operation and Development, including the United States, the United Kingdom, many European countries, as well as Mexico and Chile, in 2013 was 29%.
Some of this money is on capital expenditure. A lot of it is what the Organisation for Economic Co-operation and Development calls “consumption” spending – that is, spending on the ordinary goods and services involved in the running of a department. Taken together, South Africa’s government departments are outsourcing the lion’s share of their work to third-party providers.
Some see this as progress. Since the 1990s, “modern” public administration has prided itself on its post-ideological credentials. The question was no longer whether markets or states should provide services, but rather who was best placed to do so.
The size of South Africa’s procurement spend might mean that departments are making strategic choices about who is best able to provide the service in question and, in the process, are promoting local economic development and black economic empowerment by creating opportunities for thousands of private companies, many new and many black-owned.
But this happy view is unsettled by the second reason why we should all be interested in procurement. It is not so much the size of procurement spend that is important: what matters is the state of the organisations responsible for that spending.
Since 2000, the system of public procurement has been radically reformed. Historically, procurement was handled through a centralised system that included a state tender board in Pretoria, plus another dozen or so sites where goods and services were bought. With the introduction of the Public Finance Management Act, procurement was decentralised and now located wherever an official was in charge of a budget.
On its own terms, this development seemed to make sense. Local officials, the argument went, knew what their departments needed. It should be left to them, rather than some bureaucrat in Pretoria, it was believed, to contract for these goods and services.
The problem is that decentralisation has gone very far indeed. In the Eastern Cape provincial government, for example, there are tens of thousands of procurement points. Extrapolating from this example, countrywide, there may be hundreds of thousands of points where goods and services can be procured. This means that, over the past 14 years or so, the structure of government has been transformed. There are hundreds of thousands of points of procurement in the public sector.
At the most basic level, this situation makes co-ordination across tiers of government, between departments, and even across offices in the same department, near impossible. There are just too many places where strategic decisions are being made.
Until very recently, moreover, decentralisation was not accompanied by measures to set pricing standards and procurement norms. Brooms for one office could cost double or three times the price they did for an office across the street.
Outsourcing and decentralisation have also blurred the lines between public and private; likewise, they complicate lines of accountability. Who is responsible when a service provider disappears or goes out of business or simply doesn’t do the job? In this context, the opportunities for corruption have been relentlessly multiplied.
Each site of procurement has its own political economy. In many provinces, for example, school textbooks and furniture are not centrally procured. Instead, thousands of autonomous school governing bodies are given a budget to undertake this function on their own.
Ongoing research shows how, today and in the past, school budgets are and were fiercely contested by several social groups – not least between principals, students, teachers and parents, but also, depending on the case, by district officials, inspectors and even traditional authorities. In other words, what happens to the money is often a result of the balance of forces in and around schools. If we extrapolate from this situation we can begin to appreciate what lies behind the unevenness of the performance of departments and agencies across the government sector. In some cases, professional interests and processes win out over others.
The right services and goods are procured at reasonable prices for good reasons. Far more frequently, this does not happen. Sometimes local offices are “captured” by local elites. More usually, the competition between social groups cannot be resolved. Decisions cannot be taken and institutional stasis results.
This is not simply a problem of poor leadership or unskilled officials. The problem is structural: it lies with the architecture of government.
Let us conclude where we began, with a remark about what this means for the terms and concepts we use to understand and change South African society. In an influential 2008 book, Johannesburg: The Elusive Metropolis, Achille Mbembe and Sarah Nuttall called on academics to turn the page on political economy.
Today, we can say this call was misguided. One of the big stories of contemporary South Africa is the transformation of the state and the proliferation of tens of thousands of political economies.
Ivor Chipkin is the director of the Public Affairs Research Institute and Ryan Brunette and Gumani Tshimomola are researchers there. This article is based on the keynote address at the annual South African Sociological Association conference.