State’s Developmental Role Puts Procurement at Centre of Economy

Following years of economic hardship caused largely by the pandemic and exacerbated by the ripple effects of a constrained global supply chain, the South African government’s role in driving economic growth and job creation has been put back into the spotlight.

With the Presidency announcing a raft of measures aimed at attracting foreign direct investment, unlocking local investment, improving capacity-building, and creating new jobs, work is underway to repair some of the damage caused by COVID-19 and to rebuild the economy.

While these are essential interventions in a struggling economy, one often-overlooked aspect requires closer inspection: the state’s procurement capacity and competitiveness.

In South Africa, the government is the single largest buyer in the country, spending more than R500-billion on goods, services and construction works per year through more than 1000 procuring entities. However, the quality of procurement outcomes depend on how readily the state can access the best suppliers in the market to deliver the highest-quality goods and services.

As a strategic pillar of the country’s economy, public procurement can be used strategically to fast-track the state’s development agenda and ensure essential goods, services and economic opportunities reach those that need it most.

Procurement enables development capacity

The OECD lists public procurement as the cornerstone of strategic governance, and highlights its role as a crucial pillar of service delivery.

In South Africa, this rings especially true. The government plays a key developmental role across nearly all industries, mobilising its purchasing power and leverage over the economy to create employment opportunities and drive growth.

Through its vast procurement system, the SA government delivers essential services, builds and maintains critical infrastructure such as road networks, ports and the rail system, funds schools and public health facilities. In addition, the vast purchasing power of the state means it plays a vital supporting role to many entrepreneurs and small businesses who design and develop services that benefit key economic sectors or assist government in its delivery of essential services to marginalised or poor communities.

However, when such procurement processes are slow, inefficient or overly administrative, it can have a dire effect. Service delivery may stall due to delays in procuring the required goods or services, critical infrastructure may deteriorate due to delays in repairs or maintenance, and small businesses may face financial ruin due to delays in getting projects approved, suppliers loaded to the national procurement system, or simply due to issues with payment.

Efficiency key to state’s mandate

The Office of the Chief Procurement Officer, which is tasked with overseeing and modernising the country’s procurement system, plays a vital role in ensuring our public procurement system is fit for purpose.

The OECD recommends several guiding principles to ensure public procurement activities are efficient and deliver on the state’s mandate, including:

  • Streamlining the public procurement system and its institutional frameworks, starting with the development of a service-oriented public procurement system that reduces red tape and administrative costs;
  • Implementing sound technical processes to meet customer needs, with a focus on ensuring adequate technical expertise among evaluators and allocating sufficient resources and expertise for contract management once the contract has been awarded; and
  • Developing tools to improve procurement procedures, reduce duplication and drive greater value for money, with aspects such as centralised purchasing, framework agreements, e-auctions and contracts with options coming to the fore.

Considering the scope and breadth of public procurement activities, achieving this level of efficiency is impossible without the use of digital technologies.

Digital technologies hold key

Technology has a guiding role to play in improving the state’s procurement efficiency and ensuring procurement activities deliver the greatest possible benefit to citizens and the broader economy.

Implementing an efficient, transparent digital procurement system can give government decision-makers access to real-time insights into how each sector of the economy is operating. When government departments and state-owned entities work from a reliable single source of accurate procurement data, it can reduce costs, improve decision-making and enhance the overall efficiency of the state.

Leveraging international best practices through partnering with global technology providers can also lend useful insights to the procurement process, helping government avoid costly mistakes and ensuring systems and processes are built on best practices.

The use of best-practice templates for key procurement functions can also help drive down costs and ensure procurement activities are built on the most efficient and transparent modern processes, helping build trust between the state and its suppliers. This efficiency can also enhance the state’s competitiveness with the private sector and improve access to best-of-breed solutions and suppliers.

As public procurement becomes more efficient and the state enhances its ability to source market-leading goods and services, the outcomes for citizens will also improve. This can mean better schools, more reliable infrastructure, improved healthcare, greater economic participation, job creation and economic growth.