Corruption being fought across the board

18 Nov, 2022 - 00:11 0 Views
Corruption being fought across the board

eBusiness Weekly

There was a time when everyone assumed that corruption was limited to the State sector and those running the private sector were given a free halo whenever they bought a new suit, but recent events have shown that this is simply not so.

For a start, as the Government, the Auditor General  and the Zimbabwe Anti-Corruption Commission hammer State corruption and weed out the corrupt, and we should not forget the sterling work Zimra is doing when we remember Al Capone was jailed for tax evasion not violent crime, the dishonesty in the private sector becomes ever more obvious.

We have seen quite a bit of this during this year, and the determination to do something about it. And that something has been effective. We had those banks breaking regulator rules on lending, and ending up paying large civil penalties, with more to come if they continued, This was hardly a few rotten apples, since 12 of the 16 banks were nailed.

That showed the advantage of using civil law, rather than criminal law, in a Zimbabwean context where, unlike what we see in the United States, deal making in return for no contest to charges can produce fines without any admission of guilt and a criminal record. But civil penalties produce almost identical results, once the probabilities show something suspicious has happened.

Then we had the case of private sector companies overcharging the Government. Some were assuming exponential rising black market exchange rates and pegging their prices to what they guessed might be the black market rate on pay day, and being rather liberal how they did those sums and assuming the worst.

That was tackled by the Ministry of Finance and Economic Development, which was given the task last year in amendments to procurement law to ensure that which Government department ordering stuff was getting value for money. The Treasury now longer just pays out on presentation of an invoice.

The problem there was the way State procurement is done. The Procurement Regulatory Authority of Zimbabwe sets the rules, and then pre-qualifies suppliers by insisting they are properly registered businesses, have paid their taxes up to date, have physical premises and generally are a functioning company, not someone with a briefcase and a phone.

In some sectors they are able to go further, and grade suppliers. Construction is an excellent example where potential contractors are in categories. The small or new company can build staff cottages; a very big and well-resourced contractor can build very large buildings or bridges. And everyone else is somewhere in between. Firms move up the ladder as they grow and complete work at each stage successfully.

That categorisation came about as result of private sector needs, with architects and property developers needing to know who was able to handle each type of work, but PRAZ was able to take that over for State work.

Other sectors could possibly do the same, or at least list the firms in their sector and provide more useful information. It would make sector associations far more relevant.

We have criticised outfits like the Confederation of Zimbabwe Industries for being out of touch with many or even most of their potential members, but if they offered practical services like listing, with physical checks, of resources and staff skills this would help many, and not just the State buyers, to make short lists and double check the sort of information that almost everyone, public and private, asks for in tenders. Those qualification checks make up the bulk of the assessment work in the private sector when tenders are called and business could be speeded up with more certified data online.

So PRAZ could improve its data system on potential suppliers. Even crooks can register a company, pay taxes and rent space.

The actual floating of tenders, evaluation of tenders and purchase orders are done by the departments needing goods and services. This makes sense. The old tender board with centralised purchase decisions not only opened opportunities for corruption, but more importantly ensured the final decision was made by people who probably did not have the faintest idea of what they were buying.

This worked okay in the old low-tech environments, and with anything even moderately higher tech coming from an external supplier who had a record of business with the British or South African governments. But was hardly adequate for the present Zimbabwean situation.

But two new problems appear to have arisen. First there have been cases of over-specification, asking for something that is far more complex than what is needed, and the fact that technical experts are not so cost conscious as say a financial manager. We see this in the private sector frequently where the technical engineer wants the best, regardless, and is not desperate to look at pricing.

The private sector solution is to have the financial manager involved throughout the process with the technical or operations manager and asking those difficult questions over why the cheaper solution on offer will not work. Generally a workable solution is found.

The Government cannot really involve the Treasury at the early stage, except to create the line item in the budget. But ministries and departments have their own administrative officers who control how those budgets are spent, and should be involved early. Sometimes they are overridden.

So last year that extra tier was put in with the Treasury becoming involved at the contract and payment stages. Someone delegated by the permanent secretary had to check market values. A few months ago the present permanent secretary went a bit further and demanded that the buying department did that data collection before signing off and sending him the bill.

That caused a bit of a rumpus, but it is worth recording that 70 percent of suppliers, who all rushed in with their spread sheets and documents, were able to show almost instantly that they were pricing properly and were paid promptly. We never heard much about the other 30 percent but presumably they blamed someone in their organisation for making a mistake and adjusted.

The serious example was that Parliamentary computer order. It appears there was possible collusion among suppliers, since all on the shortlist were grossly overpriced, In fact the winner, said to have the lowest price, was charging triple the market price, so heavens alone knows what the others were bidding. In the investigation by a Parliamentary committee it was found that the person best able to check for value, the IT manager, was overridden. Fortunately the backstop worked and the Treasury killed the deal but the whole process shows the danger of ignoring your own experts,

Then just last week we had those 19 companies banned from future Government business because although they passed all the tests and won the contracts and were paid, immediately rushed to the black market using their Government payments. They had been warned, and they went ahead. The sole reaction to the news story came from those who thought the directors needed to be banned individually, since it is so easy to register a new company. They have a point.

The Government had, reluctantly, turned a partial blind eye to the practice when it first came to light, changed the payment system to include some foreign currency and then gave the warning that future breaches would result in more determined action. The particular problem was also one reason for the minting and sale of gold coins, to give an alternative to the hoarders. A lot of people listened but the 19 did not and were caught.

The cleaning up of the Zimbabwean business environment cannot be limited to the Government, although as it uses other people’s money, the taxes we all pay, it had to be given priority. ZACC’s primary remit is the State sector, but if you read the small print in the Constitution it is not limited in its scope, and as it wins its wars against the criminals in Government it can turn its eye on the criminals elsewhere.

The Financial Intelligence Unit is building up its workload. With the Reserve Bank moving out of that detailed bureaucratic work best done by markets over exchange rates and foreign currency allocations, there was obviously spare staff available to ensure rules are followed, and there we see where the private sector was playing around.

We still need to accept that the majority want to make money in the growing business-friendly environment, and they are being given assistance rather than being reigned in, but those who want to return to the old days do need to be stopped. Ever more people are now making money honestly, and the stick-in-the mud minority need to do the same.


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