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What is Corruption? Corruption means any abuse of a position of trust in order to gain an undue advantage. This involves the conduct of both sides: that of the person who abuses his position of trust as well as that of the person who seeks to gain an undue advantage by this abuse (SECO)
How & Where Does It Happen? Corruption can occur in relation to officials as well as between private persons. It is particularly prevalent in certain kinds of transactions (for example, when awarding public contracts).
Constitution: 217 • “When an organ of state in national, provincial or local sphere of government or any other institution identified in national legislation, contracts for goods and services, it must do so in accordance with a system which is fair, equitable, transparent, competitive and cost-effective”.
Legislative Requirements In Terms of the Legislative Requirements, Chapter 11 of the MFMA, Section 115 (1) (a) & (b), states “The Accounting Officer of a municipality or municipal entity must implement the supply chain management policy of the municipality or municipal entity; and take all reasonable steps to ensure that proper mechanisms and separation of duties in the supply chain management system are in place to minimize the likelihood of fraud, corruption, favouritism, unfair and irregular practices.” This must be read with SCM Regulation 7 (1), which states “Each municipality and each municipal entity must establish a Supply Chain Management Unit to implement it’s supply chain management policy.”
Governance Requirements In Terms of the Governance Requirements, Good Practice in Governance, suggests that it is imperative for an organization to have a Strong & Effective Internal Control. The basic principles of internal control require at least the following as a minimum:- Appropriate Division of Duties/Responsibilities for Related Transactions/Functions; Qualified & Empowered Personnel with Appropriate Delegated Authority; Sound, Written Policies & Procedures and Actual Performance, Consistent with the Above First Three Principles. Components of Internal Control cover The Control Environment which consists of both Hard Controls (authorities/delegations, policies & procedures and organizational structure & reporting line) and Soft Controls (ethics, management style, principles & values); Risk Assessment, Control & Monitoring as well as Control Activities, all which must promote & support the above mentioned internal control principles.
Main Types of SCM Corruption • Value Splitting • Cover Quoting • Collusion & Price Fixing • Price Rigging • Misrepresentation • Conflict of Interest • Limited Competition • Undue Influence & Interference • Contract Manipulation • Price Adjustments
Conclusion and Proposed Solution To Eliminate/Minimize Risks Exposure Related to Conflict of Interest, Fraud, Corruption, Favouritism, Unfair and Irregular Practices as spelled out in Section 115 of the MFMA and also to Optimize Service Delivery the following need to happen:- Enforcement of the Standards SCM Function should not play second fiddle to any other function as it is currently happening The Supply Chain & Procurement Function needs to be elevated and given the recognition it deserves as one of the most critical and strategic functions in the organization, for it to achieve it’s fullest potential, as it impacts significantly on both the Service Delivery and Socio-Economic Transformation; The Supply Chain & Procurement Function and Practitioners need to be fully empowered and mandated with appropriate authority & seniority to Provide Professional advice, make Professional Judgements and Decisions and Perform their duties Independently and Objectively, without any fear and/or influence; There need to be a special dispensation when it comes to salaries for Procurement Practitioners to miminmse proneness to bribes; The Supply Chain & Procurement Function need to report Administratively Directly to the Accounting Officer and Functionally, to Any Appropriate Independent Body;
