ESKOM AND PROCUREMENT CORRUPTION

In this real case study, five $(5)$ aspects of the Eskom procurement system should be noted: the procurement system for informal and low$-$value procurement, systems failure, the procurement policy, the central database of suppliers, and procurement during emergencies.

In July $2023,$ a former senior executive of Eskom approached the Daily Maverick with an audio clip $$ dated $17$ February $2022.$ In this clip, a supply chain practitioner was in conversation with a potential supplier. Whereas the source of this recording was a private security firm that was under contract to Eskom in February $2022,$ the whistle$-$blower held a senior position at the Procurement Division at Eskom and requested to remain anonymous.

In the audio clip, it could be heard how the supply chain practitioner requests a potential supplier to submit a quote to deliver specific goods to Eskom. The potential supplier requested what goods would have to be delivered and the possible margin of profit. The supply chain official referred the supplier to the request for a quotation document and indicated that the costs of the goods would be around R$150,000.$ However, the supply chain official requested the supplier to submit a quote for R$800,000$ to Eskom. The supply chain official would then create an order to procure the goods. After delivery, the supplier should generate and submit an invoice to Eskom for payment. Payment to the supplier would be made within $14$ days. The supplier would then be entitled to a profit of R$300,000.$ With the remaining R$350,000,$ the supplier should then reimburse the supply chain official and his line managers.

Informal and Low$-$Value Procurement

A special procurement regime is implemented at Eskom for procurement below R$1$m$.$ These types of procurement are exempted from policies and procedures for larger procurements. The cost of informal procurement to taxpayers is estimated around R$300$m per month. However, for every transaction below R$1$m$,$ a purchase request$-($PR$),$ Request for quotation$-($RFQ$),$ and purchase buyer role numbers $($PBr$)$ are generated. Each individual buyer should have a unique code $($PBR$).$

Systems Failure

However, Eskom had implemented its SAP procurement system poorly and $$ghost$$ buyer roles existed on SAP. In theory, the PBr should have a person$$s name and surname and should be unique to that specific person. However, in practice, procurement proceeded under PGr codes without any name or surname. This would make it impossible to trace corruption to a specific employee. Evidence suggested that the PBr is assigned randomly and inconsistently. For example, one buyer's surname was duplicated and assigned to more than one PBr$.$ In some cases, PBr had been assigned to entire power stations and Eskom divisions, rather than to individuals. This form of system failure made it impossible to identify those involved in corruption

Procurement Policy

Eskom Procurement and Supply Chain Management Procedure provides detailed instructions on the procurement process and multiple layers of approvals are required for procurement. This $213-$page procedure manual obligates all employees involved in procurement to be subjected to probity checks and be trained on the conflict$-$ofinterest policy. However, it contributes little to greater integrity and rather creates opportunities for malfeasance. This overly bureaucratic process and maze of official channels of communication contributed to the manifestation of corrupt opportunities across multiple vertical levels $$ involving numerous decision$-$makers.

Central Supplier Database

On the identification of a need, Eskom buyers are obligated to procure goods and services from its central supplier database $($CSD$)$ which is overseen by the National Treasury. However, many challenges exist with this procurement system. For example, non$-$operational suppliers had not been deregistered on the CSD$.$ This meant that buyers would not know whether a supplier listed on the CSD was qualified to deliver on goods and services expected. Also, even when buyers procured goods and services from the suppliers listed on the CSD$,$ they could determine the prices for goods and services themselves. In $2021,$ the CEO of Eskom realised that knee guards were procured for R$80,000$ where these goods could be purchased from a hardware store for R$100.$ Evidence also suggests that vendors were registered without proper vetting.

Emergency procurement during load shedding

To mitigate the effects of load shedding on the public, Eskom procured fuel under emergency conditions. Two fuel suppliers, which were unsuccessful during previous rounds of bidding, were contracted by Eskom to supply fuel to the value of approximately R$400$m$.$ Both these suppliers were being investigated by the Competition Commission for alleged collusion.

SOURCE

Bloom, K$.2023.$ Eskom$$s broken heart $$ inside the leaking procurement systems that keep South Africa in the dark. Daily Maverick. October $1,2023.$ Downlo