Organised crime in Africa

The rush for cash during Covid-19 highlights conflicting interests in SA

Conflicts of interest continue to be a major enabler of procurement fraud in South Africa.

By Richard Chelin, Researcher, ENACT

Following public outcry over the personal protective equipment (PPE) contract Khusela Diko’s husband’s company, Royal Bhaca Projects, received from the Gauteng Department of Health, the couple released a joint statement. They insisted ‘there was no corruption in the bidding and subsequent awarding of the PPE contract.’ In other words, due process was followed.

Diko, the former spokesperson for South African President Cyril Ramaphosa, goes further to note that the public outcry is based on the mistrust and suspicion of the public from years of cronyism where individuals close to political office unduly benefited from the state. She says the contract was cancelled and no funds were received from the department – a claim being investigated by South Africa’s Special Investigating Unit (SIU).

The Diko scandal, which came about during the initial Covid-19 outbreak, is one of many concerning PPE tender contracts involving government officials recently. This has highlighted an aspect of procurement corruption to which little attention is paid and which is the most difficult to address – conflict of interest.

Conflict of interest may be defined as a situation in which a public official has a private interest that may influence the impartial exercise of official duties, and decisions. Such a situation may not necessarily involve wrongdoing or misconduct yet it could result in a situation where public officials take advantage of their official position and insider knowledge to gain private advantage at the expense of the public interest.

Managing conflict of interest is a challenge; instituting mechanisms for its implementation will help in the long term

This was highlighted in the former public protector’s State of Capture report, revealing how corruption was a manifestation of various conflicts of interest within government and stateowned entities.

A conflict of interest situation is usually informed by two factors. First, the private interest of the public official, or their relative or associate. That is, benefits the public official or his or her family members or associates stand to receive in the decision made by the official.

These can include property, financial benefits, awards of contracts etc. Second, a conflict between private and public interests whereby the official has a private, direct or indirect, interest in the exercise of his or her functions.

Although conflict of interest does not necessarily equate to corruption, it does create an ethical dilemma. While public officials are expected to fulfil their duties with fairness and impartiality, this becomes difficult when personal interests blur decisions and preferences for personal gain. Such situations may lead to corruption. The consequences are significant for decreased levels of public trust, fairness and the state’s reputation and credibility to deliver for the public good.

Although conflict of interest in itself is not corruption per se, it does create an ethical dilemma

So what can be done to address the issue?

Article 7, sub-section 4 of the United Nations Convention Against Corruption says that states should ‘endeavour to adopt, maintain and strengthen systems that promote transparency and prevent conflicts of interest’ in accordance with the principle of its domestic law. To this end, some signatories to the convention have included conflicts of interest in their anti-corruption legislation.

In South Africa, the legislative framework that addresses the problem includes the Public Service Act, the Prevention and Combating of Corrupt Activities Act (with exceptions) and the regulations of the Public Finance Management Act, among others. Despite these laws, conflicts of interest continue to be a major enabler of procurement fraud. To begin on the pathway of rebuilding public trust and inverstor confidence to address the issue in the public sector, a twofold approach to achieving this is outlined.

Firstly, implementing the policies and procedures regarding conflict of interest that exist. Given the laws and regulations in place in South Africa, it is clear that the problem doesn’t lie with these policies but rather their effective implementation. To this end, there’s a need for oversight and accountability holding for the implementation of regulations at the various stages of the procurement processes. This may be located within the national treasury, with support from the Select Committee on Public Accounts (SCOPA) in parliament.

When left unaddressed, conflicting interests result in the undermining of public trust, fairness and an organisation’s reputation and credibility

The second approach requires the identification and disclosure of conflicting interests by the individuals concerned. This is the main issue faced in South Africa as individuals fail to disclose their interests before engaging in business with the state despite this requirement being clear in the policies. Again, a rigorous accountability holding to check that procedures are adhered to will be a key element to clawing back the entrenched conflict of interest.

An anti-corruption specialist who requested anonymity told ENACT: “To avoid disclosures of their interests, public officials would often register a company [in] their spouse’s maiden name or their family members who do not share the same surname.” These officials then become a silent director of the company and at times go to the extent of changing a letter in their surname to avoid detection.

It is thus almost impossible to detect such devious practices unless an investigation is launched into the individual’s business interest. In such instances, an undisclosed interest is considered a serious conflict of interest breach and such actions should be criminally liable and the offence treated as corruption. Strengthening the present legislation would be required to achieve this.

Managing conflict of interest is a perennial challenge; instituting mechanisms for ensuring regulations to prevent it is equally challenging. While not all conflicting interest situations are corruption, most procurement corruption cases involve some form of conflict of interest. Measures to highlight this gap, to hold dishonest public officials to account through sanctioning and remedial means are required to ensure that public funds intended to benefit the public do so, rather than personally benefit a few.

First published by ISS Today, 5 October 2020 https://enactafrica.org/enact-observer/ the-rush-for-cash-during-covid-19highlights-conflicting-interests-insa?utm_source=BenchmarkEmail&utm_ campaign=ENACT_Review+&utm_ medium=email#