Publication: Mail and Guardian Issued: Date: 2003-05-02 Reporter: Stefaans Brummer

Challenging the Tender Tango



Mail and Guardian

Date 2003-05-02


Stefaans Brummer

Web Link


Chippy Shaik was the head of defence acquisitions during the arms deal. (Photo Raymond Preston / Sunday Times)

It takes two to tango, and that is axiomatic of tender corruption. Briber and bribed entwined in conspiracy, a furtive shuffle ahead, and the rest of the floor is left standing.

It doesn't matter if our couple weren't the best dancers; they were the sneakiest and made off with the prize.

Public sector procurement is worth R180-billion a year. It is one of the main drivers of black economic empowerment thanks to policies that, transparently, add weight to bids by empowered companies.

Unfortunately, as many a Mail and Guardian exposť has shown, government and parastatal procurement is also a big driver of corruption. The stakes are high and unscrupulous players will seek hidden weightby soliciting or offering kick-backs or peddling influence.

But what, ethical considerations apart, is so bad about corruption? Tender processes are designed to have outcomes of affordability, efficiency, quality and, in South Africa, empowerment. Rig a tender and you endanger all those outcomes.

But back to the tango What if our couple are out of step; if one partner, unable to go along with the other's whispered and less-than-honourable intention, retires to the sideline? And if, dejected and slightly jealous, he or she notices that same whisper in an eager replacement's ear and the surreptitious step that follows?

What does our scrupulous dancer (now a wallflower) do? Chances are, nothing. Rat and, so is the perception, you might as well hang up your dancing shoes. If you're a company reliant on tender awards (or vice versa, an official who has to maintain good relations with service providers) it may seem better to look the other way than to be marked as so prissy or difficult that you'll never be asked to dance again.

There is danger in that perception. The more corruption is tolerated the more it flourishes. The more our wallflowers swallow their pride and turn a blind eye, the more the furtive step will become the dance itself.

How wrong! There is a growing body of experience, gained in the courts, confirming that it is worth challenging corruption. It may take loads of courage (and resources), but for some it has been worth it.

In January the Johannesburg High Court ordered Transnet to pay R57-million in damages to Sechaba Photoscan, a company that had lost the tender to acquire the parastatal's in-house printing division. The company alleged in court that it had turned down an influence-for-shares proposal during the evaluation process, and it presented evidence that Skotaville Press, the company that won in the end, had accepted a comparable proposal.

An appeal is pending, but the size of the award gives an indication just how jaundiced a view the courts take when unfair advantage is gained.

And there are other examples, if not quite as clear-cut as the Transnet tender gone wrong.

Richard Young, whose company C2I2 is gearing up for a large damages claim after it lost an arms deal contract, last year cleared a first hurdle when he won a Promotion of Access to Information Act judgment for access to restricted documentation.

Young's well-publicised allegation is that C2I2 would have won a subcontract on the corvettes, part of the controversial arms package deal, had it not been for factors including a conflict of interest shared by Chippy Shaik, then head of defence procurement, and his brother Schabir Shaik, who is in the arms trade and not too many steps removed from the French company that did win the contract.

And in 2001, Nextcom, a losing bidder for the third cellphone operator's licence, wrenched a settlement, reportedly between R60-million and R80-million, out of Cell C, which had controversially won the licence.

That settlement was clinched hours before judgement which was widely expected to have gone Nextcom's way was to have been handed down in a Pretoria High Court review forced by Nextcom.

Others are preparing to challenge perceived tender corruption. In March the M&G reported that some shareholders in a company called Cornastone E-Commerce Services (CES) had issued summons for R50-million on the Post Office after it had lost a contract to supply the latter with biometric identification equipment.

The CES shareholders claimed they had lost to a group twice as expensive after they turned down a senior Post Office official's request for a bribe.

This week the M&G reports on an expected court challenge by an IT supplier against Transnet after a Transnet division, the National Port Authority, allegedly excluded it from a tender opportunity. Another company, part of the consortium that won the contract, allegedly paid over R1-million in bribes to a ports official.

But what, apart from justice for an individual aggrieved tenderer who dares to sue, is the value of challenging corruption in court? Well, imagine if Transnet ends up having to pay Sechaba Photoscan R57-million and and then millions more to the IT supplier. Imagine the knock to its bottom line and its public image.

Once bitten twice shy, they say. Twice bitten, Transnet will presumably want to overhaul its tender evaluation procedures completely to prevent any recurrence.

The same may go for others in the public sector who administer large procurement accounts.

When it pays to challenge corruption, it becomes very expensive to tolerate corruption. And corruption will be the ultimate loser.

Wallflowers unite! Don't kiss, but tell! 

With acknowledgements Stefaans Brummer and the Mail and Guardian.