Gov’s substantial financial losses and what could have been bought or paid for instead

Gov's substantial financial losses and what could have been bought or paid for instead
"However, the report highlights significant issues in terms of financial mismanagement. In fact, Government lost over R2.2 billion on spending where suppliers did not deliver the goods following a non-compliant tender, with almost R1 billion spent on overpriced goods and services due to problematic procurement. Adding to this, the Auditor General report found that nearly R7.5 billion of government expenditure was fruitless and wasteful over the last three years."

In her report on National and Provincial Audit Outcomes, South Africa’s Auditor-General Tsakani Maluleke explained that in total, 111 (26%) departments and government entities managed to produce quality financial statements and performance reports. 

However, the report highlights significant issues in terms of financial mismanagement. In fact, Government lost over R2.2 billion on spending where suppliers did not deliver the goods following a non-compliant tender, with almost R1 billion spent on overpriced goods and services due to problematic procurement. Adding to this, the Auditor General report found that nearly R7.5 billion of government expenditure was fruitless and wasteful over the last three years.

The problem is, and the point of the article, we as average South Africans hear of these extravagant figures yet cannot place them into reality simply because we don’t work with billions. With this in mind, we now highlight massive financial losses from six departments and look at what could have been bought or paid for instead.

Department of Cooperative Governance

This department made two incorrect grant payments to a supplier in July 2018 and August 2018 due to ineffective internal controls for approval and payment processing. As a result, the department was unable to recover all the money from the supplier.

Financial loss: R103 million

What could have been bought: According to www.hyundai.co.za, a new Hyundai i20 Hatchback starts at R275 600. This means the Department of Cooperative Governance could have bought approximately 374 of these vehicles.

Department of Defence

In July 2019, the department awarded a contract for the supply and delivery of fuel using evaluation criteria that differed from those stipulated in the original request for quotations, resulting in higher prices being paid.

Financial loss: R2,57 million

In addition, the Auditor-General found the department had been paying rent for unoccupied office space.

Financial loss: R108,3 million

Furthermore, a contract for inventory and asset verification was awarded in February 2017 to two bidders on a 50/50 basis and not to one bidder that scored the highest points in the evaluation process, resulting in increased project cost.

Financial loss: R250,6 million

Total financial loss: R361.47 million

What could have been bought: According to game.co.za, a Samsung 65″ UHD Smart TV 65TU7000 can be purchased for R12 999. This means the department could have acquired approximately 27 807 smart TVs.

Department of Health (Gauteng) – 2018 – 2019

Information technology infrastructure procured without inviting competitive bids, resulting in financial loss as cheaper alternatives were available.

Financial loss: R148,9 million

A pocket of oranges can be purchased from Checkers at R44.99. This means the Department of Health could have bought 3 309 624 pockets of oranges for needy people this winter.

Department of Community Safety and Transport Management (North West) – 2018 – 2019

A contract was awarded to a supplier for learner driver training and capacitation programme in October 2015 without complying with legislative requirements for such participation. As a competitive bidding process was not followed, the ability of the supplier to deliver services was not assessed. Prepayment was made in November 2015 to the supplier for which services have not been received to date.

Financial loss: R21,3 million

A packet of Simba chips can be bought from Pick n Pay for R16.99, seeing the average person being able to buy about 1 253 678 packets of chips with the money lost.

Department of Education (Limpopo) – 2018 – 2019

Goods and services were received from the supplier of information technology services. Still, invoices were not paid as the contract was cancelled when department was placed under administration, resulting in litigation and an order against the department to pay the outstanding amount plus interest.

Financial loss: R85,2 million

An Asus Intel Celeron Laptop can be purchased for about R4 499. This means the department could have acquired 18 938 laptops for students.

Passenger Rail Agency of South Africa – 2018 – 2019

Multiple instances of non-compliance in the procurement process for locomotives in July 2012 resulted in a contract being unfairly awarded. Prepayment of R2,6 billion was made to the supplier, but the auditee derived no value as locomotives were not fit for the purpose. As a result, the supplier applied for liquidation in December 2018, making recovery of financial loss unlikely and resulting in R2,2 billion in debt owed by the supplier. An investigation by the board in 2015 resulted in a referral to the Hawks for investigation and the contract being set aside by the court in May 2019. 

Financial loss: R2,2 billion

If jobs were created, paying R8 000 per person, totalling R96 000 per annum per person—with this loss, around 2292 unemployed South Africans could have had a job. 

What are your thoughts on the financial losses by the departments mentioned above? 

Share your views in the comment section below. 

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