Blacklisting of companies: National Treasury & SIU briefing, with Deputy Minister

Public Accounts (SCOPA)

09 March 2022
Chairperson: Mr M Hlengwa (IFP)
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Meeting Summary


In this virtual meeting, the Committee met with the National Treasury and the Special Investigating Unit (SIU) to discuss the process commonly known as blacklisting, under which malfeasant suppliers could be restricted from doing business with the state for a period of up to ten years. The Deputy Minister of Finance was in attendance.

The National Treasury and SIU outlined the legislative framework for the blacklisting process, governed primarily by the Public Finance Management Act and Municipal Finance Management Act. Under the current framework, the accounting officer at the purchasing entity was responsible for requesting any restriction on a supplier or on associated individuals. Treasury then recorded the restriction in its central database. A decision to restrict a supplier could arise from internal processes, from a court default judgement, or from a referral by law enforcement agencies.

The SIU reported that it had made 506 referrals for blacklisting – 15 to national departments, and the majority of the balance in Gauteng (202), Kwa-Zulu Natal (131), and the Free State (88). However, Treasury reported that only 143 suppliers were currently blacklisted: 56 companies and 87 shareholders or directors. The discrepancy was primarily attributable to the inaction of accounting officers, who failed to restrict suppliers when appropriate or who were reluctant to request restrictions unequivocally instead of tentatively recommending them. Moreover, there were currently no names on Treasury’s tender defaulter register, because accounting officers did not inform Treasury when relevant court orders were handed down. In addition to these reporting problems, there were problems enforcing the existing restrictions. Restricted suppliers frequently attempted to have restrictions lifted through litigation, and they also registered new company names in order to avoid being flagged by the central database.

Treasury, the SIU, and Members were in agreement that there were gaps and loopholes in the current system.

Members were concerned that Treasury was reliant on accounting officers to make decisions and provide information about restrictions, while, at the same time, it lacked powers to sanction accounting officers who failed to fulfil these obligations. They were also concerned that individuals from restricted companies resurfaced in the procurement system as part of new companies, which some Members thought called for a shift in focus from blacklisting companies to blacklisting individuals. The Committee undertook to meet with accounting officers from Gauteng and Kwa-Zulu Natal, where there appeared to be many unprocessed referrals, and urged Treasury to develop a proactive plan for closing the loopholes in the blacklisting system, including by introducing legislative amendments if necessary.

The Committee also discussed a recent Special Tribunal ruling on the Beitbridge border fence matter, and asked Treasury about the vacant Chief Procurement Officer position and the planned sale of South African Airways shares.  

Meeting report

Opening remarks by the Chairperson
The Chairperson said that some Members were having difficulty connecting to the meeting because of loadshedding. Loadshedding was untenable and unacceptable. It presented a fundamental risk to every aspect of the country’s economic and political future. It was “an executive failure” and a failure of consequence management – there had been no political or administrative consequences at Eskom. Loadshedding should not be a “default position” or “knee-jerk reaction.” Fortuitously, the Committee would be conducting an oversight visit at Eskom later that month.

He welcomed attendees to the current meeting, which was about the blacklisting of state suppliers. The Minister of Finance was at a Cabinet meeting, but the Deputy Minister of Finance was present.

Opening remarks by the Deputy Minister
Dr David Masondo, Deputy Minister of Finance, said that restricting suppliers from doing business with the state – or, in popular parlance, blacklisting them – was an important step in fighting corruption and entrenching a culture of good governance throughout the state and its entities. Suppliers were blacklisted either because they had engaged in corruption or other malpractice – such as non-performance or irregularities – while doing business with the state, or because a court ruled that they should be blacklisted. 

It was a “well-known fact” that individuals in private companies and in the state engaged in corrupt activities, with various negative consequences for the country. Blacklisting helped fight corruption in two ways: it acted as a deterrent and punishment, and it inspired confidence among other companies that the state did business in a fair and competitive manner. Some companies also performed poorly on state contracts, often because of poor project management. The Eskom Medupi and Kusile programmes were a classic example. Largely because of cost overruns in such programmes, Eskom’s debt had increased from R255 billion in 2014 to R450 billion in 2019.

Another cause of underperformance was the failure by accounting officers to pay suppliers within 30 days, which created cash-flow problems for those suppliers and sometimes led to their bankruptcy. The government needed to develop regulations to punish accounting officers who failed to pay companies within the prescribed time.

On a separate matter, he said that the National Treasury’s work had been constrained by vacancies in key strategic positions. However, on Monday, interviews had been held for the Chief Procurement Officer and Accountant General positions. He was confident that permanent appointments would be made soon.

(See speaking notes)

Treasury briefing: Restriction of suppliers
Legal framework

Mr Molefe-Isaac Fani, Acting Chief Procurement Officer, National Treasury, discussed the legal framework for blacklisting, which stemmed from the Public Finance Management Act (PFMA), the Municipal Finance Management Act (MFMA), and related regulations. The Preferential Procurement Regulations were also relevant but had been declared invalid in court.

Key features of the blacklisting process, as outlined in the legal framework, included:
· The supplier had to be given an opportunity to provide reasons why a restriction should not be imposed;
· The final decision to restrict rested with the accounting officer or accounting authority in the purchasing entity;
· At the discretion of the accounting officer or authority, restrictions could be imposed on associated individuals as well as on companies;
· The period of restriction could not exceed ten years; and
· The purchasing entity had to furnish Treasury with information about the restriction, to be stored in Treasury’s central database.

Mr Fani added that companies and individuals did not “take lightly” the state’s intent to blacklist, and usually opposed the restriction.

Database of restricted suppliers and tender defaulters

There were currently 143 suppliers listed on Treasury’s database of restricted suppliers, meaning that 143 restrictions were currently in effect. This included 56 companies and 87 shareholders or directors. The duration of the restrictions was as follows:
· 26 had been restricted for between one and three years;
· 94 had been restricted for between four and six years; and
· 23 had been restricted for seven to ten years.

Alternatively, if a court convicted a person of an offence under sections 12 or 13 of the Prevention and Combatting of Corrupt Activities Act, the court could order that the person’s name should be endorsed in the Register for Tender Defaulters. The person would then be prohibited from doing business with the state for not less than five years and not more than ten years.

However, there were currently no names on the Register for Tender Defaulters. The problem was that it was the responsibility of accounting officers to inform Treasury about such default judgements, so that Treasury could include the relevant persons in the register. Accounting officers had not alerted Treasury to any such judgements.


Mr Fani said that Treasury had identified the following problems in the blacklisting system:
· Accounting officers or authorities did not restrict suppliers when appropriate;
· Accounting officers or authorities did not inform Treasury of cases of restriction through court orders, as mentioned above;
· The numbers on the database of restrictions did not accurately reflect the supply chain management environment in South Africa;
· Companies changed their names after being restricted, and state entities did not use the search function to identify restricted directors and shareholders;
· Restricted suppliers engaged in litigation to have the restriction uplifted;
· Such litigation especially occurred when restricted suppliers responded to invitations to bid and were informed (by insider information) that they had been recommended for the award of the contract; and
· Accounting officers and authorities used tentative language when applying to Treasury for restrictions – for example, by recommending restriction instead of directly requesting restriction in terms of applicable laws.

On the last point, Mr Fani said that accounting officers did not want to take responsibility for the decision to restrict. Yet the legal framework required that accounting officers had to make the decision – Treasury’s role was to implement their decision.

On name changes, he said that companies could not be identified as restricted when they changed their names. However, if the company retained the same directors and shareholders, the search function would pick that up. Sometimes the old directors were not listed as directors or owners of the renamed company, but remained active in it. State entities should alert Treasury when they became aware of such cases. There were some whistleblowers who alerted Treasury when restricted directors resurfaced, and Treasury did follow up, but such reports were rare.

(See presentation)

SIU briefing: Restriction of suppliers
Opening remarks by the SIU head

Adv Andy Mothibi, Head, SIU, agreed with Deputy Minister Masondo and with what the Committee always said: those responsible for wrongdoing, whether in the private or the public sector, had to be held accountable for wrongdoing. Blacklisting was one way to ensure consequence management. Treasury was the ultimate custodian of the blacklisting process, but the SIU also had a role: when its investigations found corruption, irregularities, or under-performance, it recommended blacklisting.

He said that the Special Tribunal had, the day before, made a ruling in the Beitbridge border fence matter. That case was a typical example: the SIU’s investigation had found deficiencies in the quality of the fence, and it had submitted recommendations for blacklisting. In her ruling, the judge had said that the biggest losers in the Beitbridge saga were the state and the public, who were now saddled with a deficient border fence. It was incumbent on state officials to ensure that there was consequence management in such matters.

Types of blacklisting

Mr Pranesh Maharaj, Chief Programme Portfolio Officer, SIU, said that recommendations were made for the blacklisting of tenderers in the broadest sense – that is, tenderers could include legal entities, individuals involved in legal entities, and individuals in their personal capacity. In order not to duplicate Treasury’s presentation, he did not go into detail about the types of blacklisting. However, he briefly discussed the Preferential Procurement Regulations which had recently been declared invalid. On a purposive interpretation, there was a compelling argument that the regulations had been enacted to give effect to the constitutional imperative that the state should not be party to contracts involving misrepresentations, in the broadest sense of the word. Applying this interpretation, the SIU believed that any misrepresentations made by a tenderer in a bidding process would open that tenderer up to restriction by Treasury. Before they had been declared invalid, the regulations had been very specific in defining the circumstances under which blacklisting was justifiable.

Of course, because blacklisting amounted to administrative action, it had to be procedurally fair and certain requirements therefore had to be met. He outlined these requirements.

SIU referrals

The SIU had made a total of 506 referrals to provincial and national departments for blacklisting, broken down as follows:
15 referrals to national departments;
One referral to the North West;
Two referrals to the Eastern Cape;
Three referrals to the Western Cape;
Eight referrals to the Northern Cape;
56 referrals to Limpopo;
88 referrals to the Free State;
131 referrals to Kwa-Zulu Natal; and
202 referrals to Gauteng.

Mr Maharaj said that this suggested that Treasury was justified in its concern about inaction by accounting officers. It would be necessary to interrogate what had become of the 506 referrals and why they had not translated into restrictions.

(See presentation)


The Chairperson welcomed Mr A Lees (DA), who had had connection problems due to loadshedding.

Mr Lees joked that, as a politician, the Chairperson may have had other, unspoken thoughts about his absence earlier in the meeting. He thanked the presenters for the briefings – he had always had positive experiences with Treasury, although he could not say the same about the Ministry of Finance. 

He said that the Beitbridge border fence matter was topical and Adv Mothibi had correctly expressed strong opinions about it. The Special Tribunal ruling was “a big step forward” – but, unfortunately, it was only a step. The judgement did not appear to hold anyone accountable except the contractor. It was common knowledge that the contractor had been given lots of other work, and probably would not suffer too badly from having to repay the profits on the Beitbridge contract. The entire contract had simply been “a complete waste of money.” There had now been a positive ruling on the recovery of funds, but what about the officials who were responsible for engaging an improperly conceived contract, and for failing to properly supervise it to ensure value for money? Who were those officials – what were their names? What were the SIU’s recommendations for consequence management? The Minister should resign but was unlikely to do so. However, the Committee could at least follow up with the department in order to hold accountable the officials involved.

Adv Mothibi agreed that it was an important ruling – the Beitbridge contractors had tried hard to evade accountability, including by challenging the jurisdiction of the Special Tribunal. The ruling was in fact clear that the officials involved had to be held accountable. He directed Mr Lees to paragraph 50 of the ruling in this regard. The SIU had previously briefed the Committee on its Beitbridge investigation, so Members were already aware that the SIU had referred officials for disciplinary processes. It would follow up with the department to ensure that the referrals were acted upon.

Mr Lees said that it was encouraging to hear that the ruling directly mentioned consequence management for implicated officials. He knew that the SIU would do its part. The Committee should also play a part, but that could be discussed on a different occasion.

Ms A Siwisa (EFF) asked what happened to accounting officers who “turned a blind eye” to the appointment of restricted suppliers. For example, Mr Fani had mentioned that it sometimes transpired, after the appointment of a supplier, that a blacklisted director was indirectly involved in the bid. If an accounting officer ignored such a situation, how did Treasury respond? This kind of situation appeared to arise due to a “loophole” in the legislation. The state often acquired services from a blacklisted company under a new name, or from an individual under an alias. A system had to be put in place to ensure that the state was able to detect cases in which blacklisted individuals and companies resurfaced under a different guise. Such loopholes had to be closed – Treasury’s frustration with the current system was evident. 

Adv Mothibi replied that the Treasury could provide a more thorough response, but, as part of the tendering process, accounting officers should check bidders against Treasury’s list of blacklisted suppliers. If it transpired that accounting officers had ignored the list, that, of course, called for consequence management.

Mr Dondo Mogajane, Director-General, National Treasury, said Ms Siwisa was correct that Treasury became frustrated when accounting officers did not communicate adequately or when it detected that restricted suppliers had resurfaced in tendering processes. The PFMA and MFMA located responsibility and accountability with the accounting officer. There was no reason for departments to “throw the ball back” to Treasury. It was expected that, during a tendering process, the internal tender committees would do the requisite checks – for restrictions on the suppliers, for appropriate pricing, and so on. Treasury did not have control over these internal processes. It could only become aware that restricted suppliers had resurfaced if the Central Supplier Database (CSD) flagged a problem. It was frustrating that accounting officers were not taking responsibility in the way the PFMA required them to. He agreed with Adv Mothibi that there had to be consequence management, and accounting officers had to enforce consequence management against officials who had failed to do the required checks.

Mr Fani added that restrictions were recorded in the CSD, and the CSD identified individuals by their identity numbers. This meant that if a restricted company appeared under a different name but with the same directors, the CSD would invalidate its registration as a supplier, and it would be unable to get any state contracts. Also, although accounting officers sometimes were not forthcoming with the information required for Treasury to effect a restriction, Treasury was careful not to close the matter until it had received the necessary information. 

Mr S Somyo (ANC) said that the presentations “point[ed] a finger” at accounting officers as responsible for delays. That responsibility might also extend to executive authorities. The SIU had made 506 referrals for blacklisting, but Treasury had only blacklisted 143 suppliers. That confirmed what Treasury was saying: “the buck stops with the accounting officers”, who were failing to take proactive steps against companies implicated in wrongdoing or underperformance. He understood Treasury’s frustration. Moreover, procurement was not just about rands and cents – sometimes the provision of substandard services could result in the loss of life. For example, if a deficient border fence allowed people to enter the country illegally, some of those people might end up committing serious, or even fatal, crimes inside the country. A poorly constructed road or bridge could also result in deaths. The failures of accounting officers in such cases were sometimes a failure to exercise properly, and account properly on, the powers delegated to them by the Treasury. This brought into question the delegation of those powers. Perhaps it was necessary for Treasury to note such failures and to reconsider the delegation of accounting authority. Was it possible to withdraw the delegated powers? How could Treasury ensure that accounting authorities were accountable for the exercise of their delegated powers?

He said that there had been an acting Chief Procurement Officer at Treasury for a long time. When would a permanent appointment be made? 

Mr Mogajane replied that, as Deputy Minister Masondo said in his opening remarks, interviews had been held. The appropriate committee had made its recommendations and the Cabinet process to finalise the appointment was ongoing.

Mr Lees had also planned to ask about the Chief Procurement Officer. The post had been vacant for a long time. The Committee missed Mr Kenneth Brown, the previous incumbent, and it hoped that a good appointment would be made. 

Mr B Hadebe (ANC) said that the outcome in the Beitbridge border fence matter confirmed the importance of the Committee in rooting out corruption, ensuring accountability, and expediting consequence management. The Committee’s oversight visit to Beitbridge had clearly been productive. He thought that the Committee should insist that the SIU expedite the consequence management process for implicated officials. The “washing line that is purported to be a fence” at Beitbridge should be removed and replaced with a real fence, with the costs borne by those responsible for the failure of the project. Although it was not the habit of the Committee to “applaud the fish for swimming”, the SIU should be congratulated for its success in the Beitbridge matter.

He agreed with Mr Somyo that the discrepancy between the 506 referrals and the 143 restrictions was troubling. The Committee had wanted Treasury to specify what the bottlenecks, lacunae, and loopholes were in the blacklisting process. Why was the pace of blacklisting so slow, and what had Treasury done to try to address the challenges? The presentation had not answered this, and he was still interested in finding out the answer. While being briefed on COVID-19 personal protective equipment (PPE) corruption, the Committee had heard that some SIU referrals dated back two years. Yet the legal framework, as presented by Treasury, suggested that the process should take days or weeks, not years. Why was it taking Treasury over two years to process some of the referrals for blacklisting?

He noted that Mr Fani had said that suppliers did not take lightly the intent to restrict. He wanted to get an idea of how many contractors had gone to court to challenge restrictions, and how many had done so successfully. How many restrictions had been overturned because of non-adherence to procedural requirements? What had happened to the officials or accounting officers who had failed to adhere to procedural requirements? These were the kinds of details that the Committee had wanted to hear. Consequence management had to be enforced. 

Mr Mogajane replied that Treasury had followed the Committee’s brief in focusing on the blacklisting process. He therefore did not have at hand the figures about litigation, although he presumed that Treasury could find the information. However, he reminded Mr Hadebe that the blacklisting process was not led by Treasury. Accounting officers and executive authorities had a key role in blacklisting and sanctions. It was the accounting officers who had to take action on, and make decisions about, blacklisting. The SIU and other law enforcement agencies also had responsibilities under the law, insofar as their investigations uncovered evidence which might call for blacklisting. This delineation of responsibility was very important.

Moreover, the law, in its current form, did not give Treasury any powers to sanction. That was one criticism of the PFMA – Treasury did not “have teeth” by way of sanctioning powers. There were clearly loopholes in the current legislative framework, but Treasury had to adhere to the prescribed framework. If Mr Hadebe was asking what Treasury had done to enforce consequence management against accounting officers, he could not give a satisfactory answer – Treasury did not have the authority, or the responsibility, to enforce consequence management against accounting officers. Indeed, it would be taken to task if it exceeded its powers and functions in that way. If Treasury detected wrongdoing, all it could do was bring the information to the attention of the relevant executive authority, who was responsible for acting on it and implementing sanctions if necessary. This might be considered a flaw in the current system.

Mr Fani added that there were no pending matters before Treasury, insofar as blacklisting was concerned. He was aware of one matter that had been disputed and was going through the correct dispute mechanisms. All other matters referred to Treasury had been resolved.

Ms V Mente (EFF) said that she did not understand why Mr Mogajane portrayed Treasury as “helpless” to act when accounting officers procured from restricted suppliers or otherwise failed to fulfil their duties. The PFMA, and particularly sections 2c(ii) and 2b(ii), dealt with delegations of power by Treasury. Specifically, Treasury, as the custodian of all state funds, entrusted accounting officers with the responsibility to look after a portion of those funds on its behalf. Accounting officers were breaching the law each time that they failed to fulfil their duties, such as the duty to ensure that the state did not do business with blacklisted individuals. It was not necessary for this to be written explicitly in the PFMA, nor would it be practical – the PFMA would then have to list all the possible transgressions, which would inevitably result in many loopholes. Broadly speaking, however, it did not make sense to say that Treasury, as the custodian of state funds, could not do anything when officials abused the powers that had been delegated to them by Treasury. Moreover, since these officials were breaking the law, they could also be held criminally liable. 

Mr Mogajane replied that Treasury was not powerless per se, but it was powerless to sanction or discipline an accounting officer. Of course, the Constitution and PFMA did give it other powers to exercise, and other duties to fulfil. For example, on an ongoing basis, Treasury briefed parliamentary committees about procurement issues it had detected, and it outlined key challenges in its quarterly reports. He was not sure exactly which sections of the PFMA Ms Mente had cited, but Treasury would follow up and would re-assess, in light of her advice, its powers and obligations under the PFMA.

Mr Fani said that he thought Treasury had already explicitly expressed its duties and responsibilities in the blacklisting process. He had also mentioned earlier that Treasury did not close an open blacklisting matter until it was fully completed and all the required information had been received. Moreover, there was a process to rehabilitate blacklisted suppliers before removing them from the blacklist at the expiry of the restriction, to ensure that delinquent suppliers were not reintroduced to the procurement system.

Mr Lees hoped to ask Mr Mogajane about a Committee matter not directly related to blacklisting. He was struggling to understand how the disposal of state assets should be handled, legally speaking. More specifically, there was an agreement for Takatso Consortium to buy 51% of South African Airways (SAA). Had that agreement been approved by Treasury? What were the proper procedures in such a situation and had they been followed in this case?

Mr Mogajane replied that Mr Lees asked him about SAA each time they saw each other – just as Ms Mente always ensured that he performed his duties correctly. He would not be able to respond in the current meeting, because he wanted to give a complete description of the entire process that had been followed in reaching the decision on SAA. He requested the chance to respond in writing. Treasury and the Department of Public Enterprises could also brief the Committee in a separate meeting. 

The Chairperson said that Treasury should provide a written response within 14 days.

Mr Hadebe said that he was still confused. Treasury said that there were no pending referrals for blacklisting on its side, yet the SIU had made 506 referrals and only 143 had been processed. Where were the pending referrals? Who was processing them? He thought Treasury had a central database which stored all information about the tenders of state entities.

Adv Mothibi replied that the SIU could also send the Committee more detailed information about the referrals, including the date they had been made and so on. However, what was important was that all 506 of those referrals had been sent to the relevant accounting officers and accounting authorities, with the expectation that they would take the necessary steps to start the blacklisting process. As both presentations had discussed, under the current process, accounting officers and authorities were responsible for requesting restrictions. So, the unprocessed referrals were currently sitting with accounting officers or authorities – that was where the delay was.

He proposed that the SIU and Treasury should work together to compare their figures. The SIU knew which state entities had received the referrals, and Treasury knew which state entities had requested restrictions. Comparing this information, they could establish the progress of each referral, and could then follow-up with the relevant accounting officers and accounting authorities. In a previous meeting, Mr Hadebe had asked how long it took to blacklist suppliers, and that question was still relevant – due process had to be followed in every case. 

Mr Hadebe agreed with the proposal. He suggested that the Treasury and SIU should provide feedback to the Committee within 14 days. And, if it transpired that accounting officers were not processing referrals promptly, action had to be taken – there should not be a “laissez-faire attitude” to consequence management.

He asked about cases in which courts instructed that restrictions should be imposed. Mr Fani had said that Treasury was not always aware of such judgements. Did the courts not inform Treasury? It would be strange if not, because Treasury was responsible for enacting the restrictions. In his understanding, when a court made a judgement which required the action or enforcement of a state entity, the court always informed that entity of the judgement. For example, the police were informed when an arrest warrant was issued. If accounting officers or authorities failed to alert Treasury to relevant judgements, did the Treasury have an alternative way of ensuring that it acted on all such judgements? What had it done to resolve this gap in the process? Also, the presentation mentioned that accounting officers sometimes failed to deal with blacklisting according to the proper procedure, and he would like to get more information about that.

Mr Mogajane replied that there was currently no mechanism in place by which Treasury could apprise itself of all court judgements. It did not know what cases the courts were hearing. Perhaps this needed to be reconsidered, with particular attention to the role of the provincial treasuries, who were “closer to the action” in the provinces and municipalities than National Treasury was. When the PFMA and other relevant legislation had been envisaged and written, the drafters had not anticipated the issues that were currently facing the government, so it was necessary to constantly check and review how the legislation was working in practice. There were clearly many loopholes, and he appreciated Mr Hadebe’s advice about this particular gap – that was the value of this meeting.

He agreed with Ms Mente that the current system was not tenable – if Treasury was waiting for an accounting officer to report himself, that would not happen. There was a need to find solutions, including internal mechanisms and new ways of interacting with other state entities. Treasury would take Mr Hadebe’s suggestion forward and revise its processes where necessary, to ensure that accountability was enforced. When the SIU had completed an investigation and concluded that there had been wrongdoing by a supplier, Treasury should have the authority to sanction the relevant company immediately, without waiting for the purchasing state entity to act or to pass on information. That was not possible under the current framework. He thought that there was a need for innovation in working out how the blacklisting process would be managed in the future.

Ms Mente recalled that at a Committee meeting early in 2021, Treasury had promised that it was developing a central procurement system. How far was that process? A centralised system would help to close the loopholes whereby blacklisted individuals duplicated documents or changed the names of their companies.

Mr Mogajane replied that Treasury’s intention had not been to centralise procurement, but that Mr Fani could provide further detail.

Mr Fani said he thought Ms Mente was alluding to government’s single enterprise-resource planning (ERP) system, a repository system that would allow Treasury to do oversight and to ensure that reporting happened uniformly across government. The intent was not to centralise procurement, but to ensure that organs of state which had oversight duties – like Treasury – had access to the procurement activities carried out by other organs of state. Treasury thought that the Integrated Financial Management System (IFMS), once completed, would enable this. However, many of the issues raised about blacklisting in the current meeting – such as deficiencies in reporting by accounting officers – happened outside the system. The proper functioning of the system would rely on proper reporting. The IFMS would record the procurement of goods and services, but it would not seek to regulate the behaviour of those responsible for managing procurement. That required serious consideration, independent of the IFMS. Even if there was an ERP, behavioural issues would have to be handled separately. Currently, in terms of the PFMA, it was accounting officers who were responsible for instilling discipline in the officials entrusted with carrying out state procurement.

Mr Somyo followed up on Adv Mothibi’s proposal that Treasury and the SIU should work together to ascertain the progress of the SIU’s referrals. The difficulty was that primary accountability lay with the purchasing entities. The joint Treasury-SIU exercise would just establish that the referrals had been made to the purchasing entities but had not been processed by them. To ensure that action was taken and accountability achieved, the Committee had to intervene with the purchasing entities directly. It would be helpful for Treasury and the SIU to compile a list of the unprocessed referrals, but that had to be followed by some form of action, directed at making the state entities account for their failures. Treasury could not itself follow up, because, under the current framework, the state entities were responsible for making decisions about blacklisting. The Committee therefore needed to develop a way forward which would allow it to enforce accountability.

The Chairperson agreed. The implementation of blacklisting seemed “disjointed”, partly because Treasury was reliant on state entities for information and decision-making. However, he thought that the fundamental point was that Treasury and law enforcement agencies should start focusing on blacklisting individuals, rather than their companies. It was a “desktop exercise” for somebody simply to register his company under a new name once it had been blacklisted – that was why there were “repeat offenders in different outfits.” That was ultimately the challenge. This was also related to the need for law enforcement to be more “aggressive” on personal liability for corporate corruption. He agreed with Mr Hadebe that the Committee’s application of consistent pressure in the Beitbridge border fence matter had yielded good results – it was a “case study” in how the Committee needed to operate through focused and targeted interventions. However, Magwa Construction, for example, had been doing business with the government for ten or fifteen years, which meant that the individuals in that company had become “part of the furniture.” Blacklisting now had to “bite” individuals and become “a personal agenda.”

He said that the Committee was not expecting Treasury to “lament” – it expected Treasury to work out a “watertight” implementation and monitoring plan. If parliamentary intervention was required, Treasury should introduce the requisite amendment bills. Unfortunately, under the rules of Parliament, the Committee was not allowed to introduce bills, but Treasury could do so through the Standing Committee on Finance. The situation called for a thorough assessment of the entire blacklisting arrangement, to close the current loopholes and ensure that the same problems did not arise in the future.

He concluded that the briefings had given the Committee a sense that work was being done, and it would await Treasury’s additional written responses. The Committee also needed to know where the “areas of resistance” were. Which accounting officers or state entities were “resisting” the referrals for blacklisting? The Committee could then call them to account. The SIU’s figures suggested that Gauteng and Kwa-Zulu Natal had the most referrals. Ultimately, there had to be a “paradigm shift” in blacklisting – it should not be a mere “cosmetic exercise,” under which companies, but not individuals, were blacklisted. 

Mr Hadebe suggested that the first step was to have Gauteng and Kwa-Zulu Natal appear before the Committee, since they seemed to be the “biggest culprits.”

The Chairperson agreed.

Deputy Minister Masondo said that the Ministry would heed the Chairperson’s advice about recommending legislative amendments where necessary. It would also look seriously at the recommendations of the Zondo Commission, to ensure that it deepened and strengthened good governance across the state. The meeting had been useful and productive, and the Ministry had noted Members’ suggestions and would follow up.

The Chairperson reminded Members that on Friday they would conduct an oversight visit at the Passenger Rail Agency of South Africa (PRASA) in the Western Cape. In the last week of March, the Committee would conduct an oversight visit at Eskom, in part to follow up on its 2019 visit.

The meeting was adjourned.


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