CID Working Paper No. 171, June 2008

Procurement Issues in South Africa that Affect Growth and Development

Steven Kelman

A publication of the CID South Africa Growth Initiative

Abstract 

This report discusses four issues with regard to government procurement in South Africa. These are: (1) contracting for municipal infrastructure delivery, (2) public-private partnerships (PPP’s), (3) large capex procurements in Transnet and Eskom, and (4) the DPE “Competitive Supplier Development Program.” Recommendations are made in each area. For example, for municipal infrastructure delivery, the report recommends that municipalities rated by National Treasury as “poor” in terms of capacity would continue to receive municipal funding from national government, and to determine priorities for local infrastructure spending, but they would no longer be allowed to contract for delivery of these services. Instead, they would be required to use either a sector-specific national organization or another national organization willing to provide the services in question. Regarding PPP’s, the report suggests that, although there are reasons for concern about this approach, on balance South Africa should consider expanding use of PPP’s, which often provide better quality, a pre-commitment to maintenance spending, and another remedy against corruption. Recommendations in other areas involving procurement are made as well.

Keywords: South Africa, structure, scope, and performance of government; public administration; intergovernmental relations

JEL codes: O4, O14, O55

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