There's something rotten in the State - - -

Recently there have been a couple of judicial decisions that have made my flesh creep. 

First, there was a few billion dollars (many billions of Rand) at stake over the award of a tender to administer social benefits to South Africa's poor on behalf of the South African Social Security Agency.

One of the banks, ABSA, had set up a company called AllPay that had successfully developed safe, secure systems for delivering social grants to some 13 million deserving citizens. After a few years, their contract came up for renewal.  Enter a company called Cash Paymaster Services, whose parent is a United States-listed Net1 UEPS.  Voila! It won the contract.

AllPay went to court.  Mr Justice Elias Matojane found that the Agency had:

•  "Irrationally and unfairly" lowered the scores of the losing bidder, AllPay;
• "Irrationally" over­looked the fact that Cash Pay­master Services had failed to follow the bid specifications;
• Not included a supply chain management expert on its bid evaluations committee as it was required to do; and
• "Unlawfully" made no assessment of Cash Paymaster's black economic empowerment partners.

Any sentient person would have concluded that Cash Paymasters should be given the boot.  But no! Mr Justice Matojane ruled that the tender should not be set aside. The contract was signed, expensive infrastructure was being rolled out and that could not be undone without prejudicing Cash Paymaster. Reissuing the tender might interrupt grant payments, which would be unacceptable.

Hang on!  "Without prejudicing Cash Paymaster"? The Agency had prejudiced AllPay, and then some. In my books, justice is balanced, and the question the good judge should have addressed is not whether Cash Paymaster might be prejudiced, but whether AllPAy had been! On his own findings, there is no doubt that there was no hypothetical prejudice, there was real, blatant, out-in-the-open prejudice, and the Agency had a case to answer to AllPay.

 Mr Justice Elias Matojane features again in the matter of Esorfranki. In 2010, the Mopani district municipality awarded a tender for a R217m pipeline contract to the Tlong Rea Trading SMN joint venture.  One of the partners in the joint venture, Tango Consultants CC was only registered two weeks after the tender was first advertised.  None of the parties in the joint venture had a Construction Industries Development Board rating of 9, which was one of the key conditions of the tender.  The CIDB is a statutory body established by Parliament to stimulate sustainable growth, reform and improve the construction sector. The joint venture's bid was also higher than Esorfranki's.

On August 29 this year, Judge Elias Matojane found in favour of Esorfranki, and ruled that the municipality and the joint venture had colluded unlawfully. He found the municipality had been biased; that there had been fraud in the awarding of the tender; and that the awarding of the tender had been unlawful. He declared the tender process had been illegal and invalid and set the process aside. 

However, despite the unequivocal findings, neither the Joint Venture nor the Municipality received any sanction. The Joint Venture was permitted to retain the tender while Esorfranki was to pay its own costs.

Such a result sends the most appalling signals.  Corruption is okay.  Even if you get caught, you won't be rapped over the knuckles - or sanctioned in any other way.  Taxpayers money can be squandered at will. Construction quality is of no concern. Oh, the list goes on and on.  

Ultimately, we rely upon the law to see that wrongs are righted.  When the law fails us, that is the time to get worried, very worried.

 

Decisions, decisions!

When I presented the results of my PhD to the mining industry, a senior manager from one of the mining houses pooh-poohed my results. I had got the price of one of the reagents really wrong - they bought X for less than a third of the price I had estimated. So I said "That's wonderful - it makes my process really economic!" From then on, that manager was steadfastly against my process, and when it became the standard in the industry, his mining house was the last to adopt it.

Our paths crossed several times during my mining industry career. No matter how good my idea, he remained negative. It would not have mattered so much except that he became more and more senior. "Good chap, old A! Never makes a mistake!" I tracked his decisions over several years, and it was true. His record was faultless. He said "No!" to every decision that came his way. Never did anything to upset his pristine record. Advanced remorselessly up the corporate ladder. Reached the top and retired in a blaze of glory. Never been heard of since.

Over the last couple of days I have been attending an event called the African Economic Forum. I met up with the leader of one of our major engineering companies. He was complaining about the lack of decision-making in Government. I had made a remark about analysis paralysis, the apparent need to study a problem when the root causes were already overt and obvious. He said it was worse than that. Even when the problem was clearly identified, the fix agreed, and the money to carry out the fix had been made available, the decision to move ahead remained stalled.

The reason, he felt, was the fear of positive action. You might be making a mistake. You could end up being blamed. If you didn't decide, you wouldn't make the mistake (whatever it might have been) and you wouldn't be at risk. He cited the case of a sewerage works that had failed. The decision-maker in the local town told him not to worry - the money was in the budget. That fact that the cash had been carried over from the previous budget, and that water-born disease was now rife in the community, was of no concern to the decision-maker - or should that be decision-non-maker?

The problem is exacerbated by the number of decisions thrust upon the poor dnm. Government is busy churning out regulation after regulation. Keeping up with the regulations is a full time job for the poor dnm. The possibility of making mistakes increases exponentially. Can you blame the poor chap for needing to find another way of funding his early retirement? Sooner or later he is going to make a mistake, and when that happens he could be out of his job.

I did some work with an international think-tank a few years ago. The members of the think- tank had just finished a major study of the differences between India and China. Why had China managed to take off economically, while India hopped along the development runway, up to speed one moment and hitting the brakes the next? They concluded that it was related to the quantity of red tape marking the way forward. China had a few, clear regulations. India surged forward whenever it had a government that scrapped half the regulations, and ground to a halt when the red tape mountain clogged the wheels. All regulations created opportunities for corruption. While central government might strive to simplify things, local government, used to greasy palms in every direction, soon gummed up the works. Such simple concepts made the difference between 8% annual GDP growth and 2%.

This has to have lessons for South Africa. The inability to take decisions, and live with the consequences, is crippling our economy. It was government policy, spelled out in a white paper, that before the end of 1999 it would decide about the next big power station. It didn't take that decision until 2006, but which time it was inevitable that we would run out of power. We have run out of power, to the extent that we are closing down smelters, lifeblood of our minerals beneficiation programme, and losing hundreds of jobs as a result.

Crime and climate change

A global anti-corruption coalition Transparency International has published a ‘Global Corruption Report: Climate Change’. “Where huge amounts of money flow through new and untested financial markets and mechanisms, there is always a risk of corruption,” it said.

Indeed! Look at how the EU had to shut down its carbon market, when it found that VAT fraud on carbon trading had cost it €5 billion. When you try to trade in something as ubiquitous as carbon, you face real problems - which is why the Kyoto Protocol has been such a dismal failure. It has cost billions, and achieved nothing.

I think there has to be a lesson in there somewhere.