PPADB wants parastatals to follow its procurement procedures: PPADB Executive Director, Bridget Poppy John
Parastatals and other quasi-government institutions have been urged to exercise due diligence in public procurement so that government as the biggest buyer of goods and services in the economy gets the most reasonable and competitive fair price.
Legal Counsel at Competition Authority (CA), Kesego Modongo, told attendants at a workshop organised by Public Procurement and Assets Disposal (PPADB) that it is crucial to have vigorous competition among suppliers since it helps government to obtain the best value for money for the goods and services they procure.
He asserted that when competition is curtailed taxpayers’ money is wasted as governments pay more than a fair price. Modongo defined bid rigging as fraud and conspiracy against society since it is costly to the society.
Briefing the attendants, who formed part of their respective institutions’ Tender Committees Modongo explained that bid rigging occurs when bidders agree among themselves to eliminate competition in the procurement process, thereby denying the public a fair price.
He said in the past, the CA registered a number of cases relating to bid-rigging and warned that proper detection is needed in order to curb this kind of mischief in public procurement.
Modongo stated that bidders can eliminate competition in public procurement in many simple ways like by agreeing to submit a non-competitive bid that is too high to be accepted or contains terms that are unacceptable to the buyer, or in some instances competitors agreeing not to bid.
According to him, in some instances some companies chose to withdraw a bid from consideration or agree to submit bids only in certain geographic areas or only to certain public organizations.
The legal Counsel also noted that although the schemes used by firms to rig bids vary; the intention is to eliminate competition so that prices are higher and the government pays more.
However, he said finding signs of possible bid rigging do not necessarily mean that bid rigging is occurring; it simply shows that there may be a problem. In this instance, the best thing for procurement officials to do is to contact the CA to investigate the signs detected.
Parastatals were also implored to review the bidding process and the bids carefully, looking for any additional signs of possible bid rigging. And to achieve that, procuring entities were advised not tell any of the bidders about their concerns, as this may result in the destruction of evidence. Instead the procuring entity should make sure that detailed notes, records and documents are kept safe.
Procuring entities were further urged to be careful when dealing with a small number of bidders since the probability of bid rigging is higher if there are a few bidders. Attendants were told bid rigging requires bidders to reach an agreement that eliminates competition.
Modongo said Tender Committees should not be out-smarted by bidders as procurement is very important to the development of any economy, particularly a developing one like Botswana.
The Tender Committees were also implored to devise a mechanism of monitoring whether the bidders have had the opportunity to communicate with each other, and look for any relationships among the bidders after the successful bid is announced.
Examples of bid rigging investigated by CA in the past include the Security Tender Case in which the bidders were found to be having identical telephone contacts, the Sugar Beans Case, and the Infant Formula Milk Case.
Directorate on Corruption and Economic Crime (DCEC) official, Oreemetse Dipatane said corruption remains a concern in Botswana’s economy and public procurement is one area where corruption is rife.
Part of the problem, as observed by Dipatane is poor service delivery as citizens may elect to use bribery to receive favour in terms of service offering. In leadership positions, corruption is motivated by greed and the power of influence in decision making.
PPADB Divisional Manager-Works, Dudu Thebe advised parastatals Tender Committees against “exclusive rights” bidding where the procuring entity specifies the type of the brand they want in the Invitation To Tender (ITT) documents since this would automatically eliminate a number of competitors.
Parastatals were also advised to implement government policies in their procurement to ensure that locals are especially small business and those in the informal sector benefit from the public procurement.
The Local Procurement Scheme (LPS) dictates that preference be introduced in tenders falling within the financial threshold of the District Administration Tenders (DATCs), currently at P2 million to P4.5 million.
The purpose of the scheme is to empower the disadvantaged groups, namely, the youth, people with disabilities, women and rural suppliers through public procurement preferential treatment.
The PPADB Act gives procuring entities to purchase or get services from suppliers for the services with a value less than P30 000. Thebe however advised them to have a list of suppliers in their data base and also implored them to make an effort to engage different service or goods providers.
However, what has proved to be a concern across all parastatals is that, quasi-government institutions are faced by a problem of lack of adequate knowledge and technical skills relating to procurement.
PPADB has been engaging different stakeholders in capacity building workshops in an effort to instil integrity in public procurement. Last year, PPADB engaged all government ministries Tender Committees in a similar workshop.
PPADB, DCEC and CA officially launched a Memorandum of Understanding (MoU) in which they will cooperate against bid rigging and collusive tendering in 2011.
According to the OECD, of all government activities, public procurement is considered one of the most vulnerable to fraud and corruption. Therefore government policies and procedures in public procurement remain integral as weak governance in public procurement hinders market competition and raises the price paid by the administration for goods and services, directly impacting public expenditures and therefore taxpayers’ resources.
Corruption has severe impacts in developing countries like Botswana where public procurement accounts to more than 70 percent of the Gross Domestic Product (GDP).
Mowana Copper Mine in Dukwi will finally pay its former employees a total amount of P23, 789, 984.00 end of this month. For over three years Mowana Copper Mine has been under judicial management. Updating members, Botswana Mine Workers Union (BMWU) Executive Secretary Kitso Phiri this week said the High Court issued an order for the implementation of the compromise scheme of December 9, 2021 and this was to be done within 30 days after court order.
“Therefore payment of benefits under the scheme including those owed to Messina Copper Botswana employees should be effected sometime in January latest end of January 2022,” Kitso said. Kitso also explained that cash settlement will be 30 percent of the total Messina Copper Botswana estate and negotiated estate is $3,233,000 (about P35, 563,000).
Messina Copper was placed under liquidation and was thereafter acquired by Leboam Holdings to operate Mowana Mine. Leboam Holdings struck a deal with the Messina Copper’s liquidator who became a shareholder of Leboam Holdings. Leboam Holdings could not service its debts and its creditors placed it under provisional judicial management on December 18, 2018 and in judicial management on February 28, 2019.
A new company Max Power expressed interest to acquire the mining operations. It offered to take over the Mowana Mine from Leboam Holdings, however, the company had to pay the debts of Leboam including monies owed to Messina Copper, being employees benefits and other debts owed to other creditors.
The monies, were agreed to be paid through a scheme of compromise proposed by Max Power, being a negotiated payment schedule, which was subject to the financial ability of the new owners. “On December 9, 2021, Messina Copper liquidator, called a meeting of creditors, which the BMWU on behalf of its members (former Messina Copper employees) attended, to seek mandate from creditors to proceed with a proposed settlement for Messina Copper on the scheme of compromise. It is important to note that employee benefits are regarded as preferential credit, meaning once a scheme is approved they are paid first.”
A savingram the Ministry of Local Government and Rural Development sent to Town Clerks and Council Secretaries explaining why councilors across the country should not have access to their terminal benefits before end of their term has been revealed.
The contents of the savingram came out in the wake of a war of words between counselors and the Ministry of Local Government and Rural Development. The councilors through the Botswana Association of Local Authorities (BALA) accuse the Ministry of refusing to allow them to have access to their terminal benefits before end of their term.
This has since been denied by the Ministry. In the savingram to town councils and council secretaries across the country, Permanent Secretary in the Ministry of Local Government and Rural Development Molefi Keaja states that, “Kindly be advised that the terminal benefits budget is made during the final year of term of office for Honorable Councilors.” Keaja reminded town clerks and council secretaries that, “The nominal budget Councils make each and every financial year is to cater for events where a Councilor’s term of office ends before the statutory time due to death, resignation or any other reason.”
The savingram also goes into detail about why the government had in the past allowed councilors to have access to their terminal benefits before the end of their term. “Regarding the special dispensation made in the 2014-2019, it should be noted that the advance was granted because at that time there was an approved budget for terminal benefits during the financial year,” explained Keaja. He added that, “Town Clerks/Council Secretaries made discretions depending on the liquidity position of Councils which attracted a lot of audit queries.”
Keaja also revealed that councils across the country were struggling financially and therefore if they were to grant councilors access to their terminal benefits, this could leave their in a dire financial situation. Given the fact that Local Authorities currently have cash flow problems and budgetary constraints, it is not advisable to grant terminal benefits advance as it would only serve to compound the liquidity problems of councils.
It is understood that the Ministry was inundated with calls from some Councils as they sought clarification regarding access to their terminal benefits. The Ministry fears that should councils pay out the terminal benefits this would affect their coffers as the government spends a lot on councilors salaries.
Reports show that apart from elected councilors, the government spends at least P6, 577, 746, 00 on nominated councilors across the country as their monthly salaries. Former Assistant Minister of Local Government and Rural Development, Botlogile Tshireletso once told Parliament that in total there are 113 nominated councilors and their salaries per a year add up to P78, 933,16.00. She added that their projected gratuity is P9, 866,646.00.
A surge in consumer spending is expected to be a key driver of Botswana’s economic recovery, according to recent projections by Fitch Solutions. Fitch Solutions said it forecasts household spending in Botswana to grow by a real rate of 5.9% in 2022.
The bullish Fitch Solutions noted that “This is a considerable deceleration from 9.4% growth estimated in 2021, it comes mainly from the base effects of the contraction of 2.5% recorded in 2020,” adding that, “We project total household spending (in real terms) to reach BWP59.9bn (USD8.8bn) in 2022, increasing from BWP56.5bn (USD8.3bn) in 2021.” According to Fitch Solutions, this is higher than the pre-Covid-19 total household spending (in real terms) of P53.0 billion (USD7.8bn) in 2019 and it indicates a full recovery in consumer spending.
“We forecast real household spending to grow by 5.9% in 2022, decelerating from the estimated growth of 9.4% in 2021. We note that the Covid-19 pandemic and the related restrictions on economic activity resulted in real household spending contracting by 2.5% in 2020, creating a lower base for spending to grow from in 2021 and 2022,” Fitch Solutions says.
Total household spending (in real terms), the agency says, will increase in 2022 when compared to 2021. In 2021 and 2022, total household spending (in real terms) will be above the pre-Covid-19 levels in 2019, indicating a full recovery in consumer spending, says Fitch Solutions. It says as of December 6 2021 (latest data available), 38.4% of people in Botswana have received at least one vaccine dose, while this is relatively low it is higher than Africa average of 11.3%.
“The emergence of new Covid-19 variants such as Omicron, which was first detected in the country in November 2021, poses a downside risk to our outlook for consumer spending, particularly as a large proportion of the country’s population is unvaccinated and this could result in stricter measures being implemented once again,” says Fitch Solutions.
Growth will ease in 2022, Fitch Solution says. “Our forecast for an improvement in consumer spending in Botswana in 2022 is in line with our Country Risk team’s forecast that the economy will grow by a real rate of 5.3% over 2022, from an estimated 12.5% growth in 2021 as the low base effects from 2020 dissipate,” it says.
Fitch Solutions notes that “Our Country Risk team expects private consumption to be the main driver of Botswana’s economic growth in 2022, as disposable incomes and the labour market continue to recover from the impacts of the Covid-19 pandemic.” It says Botswana’s tourism sector has been negatively impacted by the Covid-19 pandemic and the related travel restrictions.
According to Fitch Solutions, “The emergence of the Omicron variant, which was first detected in November 2021, has resulted in travel bans being implemented on Southern African countries such as South Africa, Botswana, Lesotho, Namibia, Zimbabwe and Eswatini. This will further delay the recovery of Botswana’s tourism sector in 2021 and early 2022.” Fitch Solutions, therefore, forecasts Botswana’s tourist arrivals to grow by 81.2% in 2022, from an estimated contraction of 40.3% in 2021.
It notes that the 72.4% contraction in 2020 has created a low base for tourist arrivals to grow from. “The rollout of vaccines in South Africa and its key source markets will aid the recovery of the tourism sector over the coming months and this bodes well for the employment and incomes of people employed in the hospitality industry, particularly restaurants and hotels as well as recreation and culture businesses,” the report says.
Fitch Solutions further notes that with economies reopening, consumers are demanding products that they had little access to over the previous year. However, manufacturers are facing several problems. It says supply chain issues and bottlenecks are resulting in consumer goods shortages, feeding through into supply-side inflation. Fitch Solutions believes the global semiconductor shortage will continue into 2022, putting the pressure on the supply of several consumer goods.
It says the spread of the Delta variant is upending factory production in Asia, disrupting shipping and posing more shocks to the world economy. Similarly, manufacturers are facing shortages of key components and higher raw materials costs, the report says adding that while this is somewhat restricted to consumer goods, there is a high risk that this feeds through into more consumer services over the 2022 year.
“Our global view for a notable recovery in consumer spending relies on the ability of authorities to vaccinate a large enough proportion of their populations and thereby experience a notable drop in Covid-19 infections and a decline in hospitalisation rates,” says Fitch Solutions. Both these factors, it says, will lead to governments gradually lifting restrictions, which will boost consumer confidence and retail sales.
“As of December 6 2021, 38.4% of people in Botswana have received at least one vaccine dose. While this is low, it is higher than the Africa average of 11.3%. The vaccines being administered in Botswana include Pfizer-BioNTech, Sinovac and Johnson & Johnson. We believe that a successful vaccine rollout will aid the country’s consumer spending recovery,” says Fitch Solutions. Therefore, the agency says, “Our forecasts account for risks that are highly likely to play out in 2022, including the easing of government support. However, if other risks start to play out, this may lead to forecast revisions.”