Next week’s Budget offers the state a chance to act decisively in tackling corruption by being transparent about BEE premiums in public spending, as is constitutionally required.
So says IRR Legal executive director Gabriel Crouse.
In a statement, Crouse notes that President Cyril Ramaphosa recently said he was aware that the greatest source of corruption in South Africa was the public procurement system, through which the state spends roughly R1.2 trillion per annum.
“The Auditor General reports that the majority of incidents of corruption originate in the procurement system,” Ramaphosa said. “We cannot allow this cancer to continue and we must therefore act.”
Next week’s Budget, Crouse argues, gives the government the opportunity to tackle the “cancer” highlighted by the President.
“The current procurement system places what a Treasury official calls a ‘cap’ on BEE ‘preference premiums’ of 25%. However, Treasury has not stated the amount of funds spent on BEE “preference premiums” since the year 2000, although these payments have been made every year since.”
In a webinar yesterday to launch the IRR’s latest paper in its Blueprint for Growth series, Cut VAT & BEE Premiums, Crouse, its author, explained how making BEE premiums transparent would “resolve an obvious political dysfunction at the heart of South Africa’s no-growth period since 2008”.
“Polling indicates that most South Africans think BEE premiums should be cut to zero, and that taxes on ordinary people should be reduced due to the lack of value for money in government spending. However, no political parties are seriously pushing to reduce BEE premiums or the tax burden.
“That is likely to change if the constitutional requirements of ‘transparency’ and ‘expenditure control’ at Treasury are implemented by making the cost of BEE premiums explicit.”
Crouse also pointed out that the Zondo Report, the Harvard Growth Lab, and other notable authorities had demonstrated that the “confusion caused by non-transparent BEE premiums overburdened procurement offices, which in turn facilitated corruption”.
Said Crouse: “President Ramaphosa is right to call procurement corruption a ‘cancer’. Any good doctor will tell you that the first thing you need to do is find the cancer. Then you can take it out. Finding the cancer here means making the procurement system transparent for the first time in nearly three decades by exposing the annual cost of BEE premiums.”
Read the report, and watch the webinar, here.
[Image: Towfiqu barbhuiya on Unsplash]