Transcript SUPPLY CHAIN MANAGEMENT (SCM) IN THE PUBLIC SECTOR

MUNICIPAL SUPPLY CHAIN
MANAGEMENT
ALL IS NOT GOLD…!
ABC Town’s former city manager, Slippery Eel may face both
criminal charges and a bill of almost R9m.
The Mail and Guardian reports that Eel, who had authority
as manager to approve contracts only up to R350,000, is
implicated in the irregular awarding of a R8.5m contract to
Shady Consulting for work on a proposed Jewellery City Project
at the city’s waterfront.
Auditors have estimated the work carried out by Shady to be
worth no more than R1,5m.
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MR 10 %!
In a related story speculation is rife around
the identity of an unnamed city tender
official, nicknamed ‘Mr. 10 per cent’, who
allegedly received kickbacks for awarding
contracts ….
According to a report by the Cape Argus’
Bulelani Phillip, the nickname was given to an
official who apparently got kickbacks for
swinging tender awards to companies doing
business with the city…
3
Municipal mafia foiled
Vicki Robinson reports how a group of senior councillors and
officials of the Sicilian municipality in the ABC Province ran an
“organised corruption syndicate” allegedly looting the
municipality of more than ten percent of its R1.5 billion budget.
The mayor, Don Corleone, was fired by the XYZ party in
October 2005 and in April 2006 the chief operating officer Al
Capone and the city manager Quick Bucks were also dismissed.
In July 2005 the Scorpions arrested the then-mayor, his wife,
his political advisor, the city manager, the chief operating officer
and then-speaker of the municipality. They appeared in court on
13 April 2006…
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An offer they could not refuse…
“… a forensic investigation revealed a scam involving an
unauthorised transaction that would cost the Sicilian
municipality R79 million for a property independently valued at
between R14 million and R25 million.
According to the Mail & Guardian the land was sold by the
municipality for a pittance after striking a deal to buy it back in
developed form. There was no tender. The deal, which was
approved by Chief Operating officer Al Capone and city manager
Quick Bucks, and involving apparent friends, came to light in a
forensic study commissioned by the municipality.”
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REFERENCE
• Full articles in the City Press (9
April 2006) and News24.com (13
April 2006)
• Full articles in the Mail & Guardian
(7 April 2006)
“SOMETHING IS ROTTEN IN THE
STATE …”
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AND ALSO IN THE STATE OF SUPPLY CHAIN
MANAGEMENT
• CONFLICT OF
INTEREST
• FRAUD
• CORRUPTION
• DISHONESTY
• UNETHICAL
BEHAVIOUR
• LACK OF VALUES
• GREEDY
!
• POOR / NON
SERVICE DELIVERY
• POLITICAL
PROFITEERING
• PLUNDERING OF
STATE RESOURCES
• ROBBING THE
POOR
• POOR GOVERNANCE
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WHAT CAUSES THE
ROT ???
• HOLD YOUR BREATH!
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TOTAL SPENDING IN PUBLIC
PROCUREMENT (1997 FIGURES)
• 19 BILLION US DOLLARS (INCLUDING
STATE OWNED ENTERPRISES)
• 19 BILLION DOLLARS!
• ESCALATION @10 % = 13 BILLION
• TOTAL = 32 BILLION US DOLLARS!
• EXCHANGE RATE = R10
• R320 BILLION!!!!!!
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R320 000 000 000 !!!
• THE NEXT SLIDE IS DELIBERATELY
LEFT BLANK TO LET YOUR MIND
DIGEST THIS FIGURE!!!
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JUST A FEW THOUGHTS…
• CORRUPTION DID NOT START IN 1994!
• WE ARE JUST LIVING IN AN AGGRESSIVELY
MORE TRANSPARENT AND DEMOCRATIC
COUNTRY
• THERE IS CORRUPTION IN THE PRIVATE
SECTOR
• AND NOT ALL SCM PRACTITIONERS
ARE CORRUPT – BUT THOSE THAT ARE
GIVE THE PROFESSION A BAD NAME
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THE CONSTITUTION
• … S217(1)“When an organ of state in
the national, provincial or local sphere
of government, or any other institution
identified in the national legislation
contracts for goods or services, it must
do so in accordance with a system
which is fair, equitable, transparent,
competitive and cost-effective.”
BACK TO BASICS OF SCM!
• PURPOSE OF THIS PRESENTATION IS
TO BRIEFLY TOUCH ON THE BASIC
ISSUES PERTAINING TO SCM IN SA
• LIKE A GOLF SWING WHEN THE
WHEELS START COMING OFF YOU GO
BACK AND EXAMINE THE BASICS
• THEREIN LIES THE ANSWER!!!
WHAT IS SUPPLY CHAIN
MANAGEMENT?
“SCM in the public sector can be defined as an
integral part of Financial Management that seeks
to introduce internationally accepted best
practice. It bridges the gap between traditional
methods of procuring goods and services and the
balance of the supply chain whilst addressing
procurement related matters that are of strategic
importance”. (Policy to Guide Uniformity in
Procurement Reform Processes in
Government: 2003)
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ELEMENTS OF SUPPLY CHAIN
MANAGEMENT
• DEMAND MANAGEMENET ( Planning, specifying, analysis,
research)
• ACQUISITION MANAGEMENT (Management,
compliance, bid documents, criteria for evaluation and adj.)
• LOGISTICS (Stock/ inventory management, warehousing,
transport, supplier payment, vendor, performance
• DISPOSAL ( Obsolescence planning, disposal strategy)
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HISTORY OF SUPPLY CHAIN
MANAGEMENT IN THE PUBLIC
SECTOR
“South Africa has a large economy. Its GDP reached
US$125.9 billion in 2000. In this growing economic activity,
total public procurement was estimated at
US$14 billion annually (1997 figures, about 13% of GDP at that
time), with an
additional US$5 billion by State Owned Enterprises.
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HISTORY OF SUPPLY CHAIN
MANAGEMENT IN THE PUBLIC
SECTOR (cont.)
• “The new Government, established
after the 1994 elections, realised the
importance of efficient public
procurement for the national economy
and embarked on a major review of the
system in place. “
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HISTORY OF SUPPLY CHAIN
MANAGEMENT IN THE PUBLIC
SECTOR (continued)
“For this purpose, it created a Task Force in
1995, headed by the State Tender Board
under the Ministry of Finance and the
Department of Public Works, with technical
and financial support from a World Bank IDF
Grant..”
The World Bank Country Procurement
Assessment Report: South Africa (2003:
(Vol.1, iii)
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YEAR
KEY EVENTS IN THE TRANSFORMATION PROCESS
1994
Election of 1st Democratic Government of South Africa
1995
Identification of broad focus areas for government procurement
reform:1) promotion of principles of good governance; and2)
introduction of preferential system to address socio-economic
objectives
1996
Task Force produced a “10 Point Interim Strategy” which
included principles and policies for equitable and transparent
public procurement and simplification of the procedures
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YEAR
KEY EVENTS IN THE TRANSFORMATION
PROCESS cont.
•
1996 The Constitution of the Republic of South Africa,
1996 adopted on 8 May 1996 and amended on 11 October 1996
by the Constitutional Assembly. It was amended by the
Constitution of the Republic of South Africa Amendment Act, 1997
(Act No 35 of 1997)
•
1997 Green Paper on Public Sector Procurement Reform
in South Africa produced for public discussion
•
1999 Public Finance Management Act (No 1 of 1999 as
amended by Act No 29 of 1999) promulgated
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YEAR
KEY EVENTS IN THE TRANSFORMATION PROCESS
cont.
2000
Preferential Procurement Policy Framework Act, 2000 (No
5 of 2000) promulgated
2000
The Report on Opportunities for reform of Government
Procurement in South Africa was endorsed for implementation
in November 2000
2001
Preferential Procurement Regulations, 2001 in terms of S5
of the PPPFA gazetted which incorporated the 80/20 and 90/10
preference point system
2001/2 Joint Country Procurement Assessment Review (CPAR)
undertaken by Government and the World Bank
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YEAR
KEY EVENTS IN THE TRANSFORMATION PROCESS
cont.
2003
The CPAR Report on Refining the Public Procurement
System: Summary of Findings and Recommendations
was presented in February 2003
2003
NCOP conducted hearings to assess the success of the
PPPFA.
2003
Policy to Guide Uniformity in Procurement Reform
Processes in Government was approved by Cabinet on 10
September 2003
2003
National Treasury issued “General Procurement Guidelines” or
“5 Pillars of Procurement” to serve as the basis for
transformation of procurement practices within the public sector.
The Regulatory Framework of SCM was gazetted in December
2003 as part of National Treasury Regulations.
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KEY EVENTS IN THE TRANSFORMATION PROCESS
cont.
2003
In December 2003, National Treasury issued
• Amendment to Regulations of the State Tender
Board Act in terms of Section 13 of the State Tender
Board Act, 1968 (Act 86 of 1968); and
• Regulations in terms of the PFMA, 1999: Framework for
Supply Chain Management
2003/4
Broad Based Black Economic Empowerment Act (No 53
of 2003) promulgated
2003/4
Municipal Finance Management Act, 2003 (No 56 of 2003)
promulgated
2004
National Treasury issued Supply Chain Management: A
Guide for Accounting Officers/Authorities” in February
2004
2005
Local Government MFMA: Municipal Supply Chain
Management (C)
Regulations
were gazetted on 30 May 2005
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KEY EVENTS IN THE TRANSFORMATION PROCESS
cont.
2005
Supply Chain Management Guidelines for Accounting
Officers of Municipalities and Municipal Entities were
issued by National Treasury in October 2005
2005-07
MFMA Circulars issued on various SCM topics to assist with
implementation
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HIGH LEVEL GUIDELINES AND
PRINCIPLES FOR SCM
GOVERNMENT
• National Treasury issued “General
Procurement Guidelines” – basis for
transformation of procurement practices
within public sector –
• Enhance government’s commitment to preferential
procurement
• Assist in transformation process
• Broader understanding by all stakeholders
National Treasury Website:
http://www.treasury.gov.za/divisions/sf/sc/GENERAL%20PROCUREMEN
T%20GUIDELINES%20-%202.pdf
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HIGH LEVEL GUIDELINES AND
PRINCIPLES FOR SCM
GOVERNMENT cont.
“…These guidelines are issued by the Government
not only as a prescription of standards of behaviour,
ethics and accountability which it requires of its public
service, but also as a statement of the Government’s
commitment to a procurement system which enables
the emergence of sustainable small, medium and
micro businesses which will add to the common
wealth of our country and the achievement of
enhanced economic and social well-being of all
South Africans” (National Treasury)
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FIVE PILLARS OF
PROCUREMENT
• Proper and successful government procurement rests upon the
five pillars of procurement
• One of the pillars broken – entire system fails
FIVE PILLARS OF PROCUREMENT
1.
VALUE-FOR-MONEY
2.
OPEN AND
EFFECTIVE
COMPETITION
3.
ETHICS AND
FAIR DEALING
4.
ACCOUNTABILITY
AND
REPORTING
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5.
EQUITY
• Initial general guidelines – further
supplemented by National Treasury
• “Supply Chain Management Guidelines for
Accounting Officers/Accounting Authorities” –
February 2004 for national and provincial
departments, issued under general authority
of the PFMA
• “Supply Chain Management Guidelines for
Accounting Officers of Municipalities and
Municipal Entities” – October 2005, in line
with MFMA
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LEGISLATIVE FRAMEWORK
•
The diagram below reflects the linkage between the Constitution and the other key acts
affecting Local Government and Municipal Supply Chain Management specifically
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FINANCIAL MANAGEMENT
LEGISLATION
Constitution
S217(1)“When an organ of state in the national, provincial or local
sphere of government, or any other institution identified in the
national legislation, contracts for goods or services, it must do so
in accordance with a system which is fair, equitable,
transparent, competitive and cost-effective.”
S217(3) issues national legislation with the requirement to
prescribe a framework which provides for preferential
procurement to address social and economic imbalances of the
past.
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FINANCIAL MANAGEMENT
LEGISLATION cont.
MFMA
S112(1) “The supply chain management policy of a
municipality or municipal entity must be fair,
equitable, transparent, competitive and costeffective and must comply with a prescribed
regulatory framework for municipal supply chain
management…”
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ENABLING LEGISLATION FOR THE
PREFERENTIAL PROCUREMENT
SYSTEM (PPPFA)
• PPPFA gives effect to S 217 (3) of the
Constitution
• Provides framework for implementation
of procurement policy contemplated in
S 217(2) of the Constitution
• Provide for matters connected therewith
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ENABLING LEGISLATION FOR THE
PREFERENTIAL PROCUREMENT
SYSTEM (PPPFA) cont.
• Promulgation and implementation of
PPPFA and regulations were followed by
the publication of a “Broad Based Black
Economic Empowerment Bill” and
supporting strategy
• Basis on which amendments to the
Preferential Procurement Regulations
were to be undertaken.
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THE 4 BBBEE PRINCIPLES
(BBBEE STRATEGY)
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ROLE-PLAYERS, FUNCTIONS AND
SUPPORT STRUCTURES IN
MUNICIPAL SCM
• The points below reflect the high level responsibilities
of some of the key-role players in Municipal SCM
• NATIONAL TREASURY
• Monitor implementation of SCM in all spheres of government
• Develop policies, procedures and practice notes/circulars to
assist the three spheres of government in achieving the
broader policy objectives as set out in the PFMA/MFMA and
further legislation
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ROLE-PLAYERS, FUNCTIONS AND
SUPPORT STRUCTURES IN
MUNICIPAL SCM cont.
• PROVINCIAL TREASURY
• Promote co-operative government among role-players
• Assist NT by monitoring delegated municipalities in terms of
compliance to National and Provincial Treasury norms and
standards
• Measure improvements in supply chain performance
• Set complementary standards
• Monitor and publish reports by municipalities and share
information
• Take intervention measures for breach of the act by a
municipality
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ROLE-PLAYERS, FUNCTIONS AND
SUPPORT STRUCTURES IN
MUNICIPAL SCM cont.
• MUNICIPAL COUNCIL AND COUNCILLORS
• Provide political leadership and direction to a municipality’s
operation through policy and oversight responsibilities
• Oversee financial management and service delivery of a
municipality
• Approve the SCM policy for a municipality
• Monitor and evaluate SCM implementation process through
regular reporting to political structures.
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ROLE-PLAYERS, FUNCTIONS AND
SUPPORT STRUCTURES IN
MUNICIPAL SCM cont.
• ACCOUNTING OFFICER
• Implementation of SCM system
• Establish a SCM unit within the CFO’s structure with the
necessary delegations.
• Develop municipal SCM policies and procedures in accordance
with national and provincial guidelines and directives
• Establish the necessary SCM Committees with clear delegations
and responsibilities
• Ensure that adequate controls are in place to prevent over- or
under-expenditure
• Ensure efficient anti-corruption and anti-fraud mechanisms are
implemented
• Contribute towards local economic development, SMME
development and BBBEE through targeted procurement
spending
• Report to National Treasury/Provincial Treasury on SCM
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FINANCIAL GOVERNANCE
FRAMEWORK
Responsible
for:
Oversight
over:
Accountable
to:
Council
Approving policy,
budget and
budget-related
plans
Mayor
Community
Mayor
Policy, budgets,
outcomes, policy
and management
oversight over MM
Municipal
Manager
Council
Municipal
Manager
(MM)
Outputs and
implementation
Administration
Mayor; council
Chief
Financial
Officer (CFO)
Outputs
Financial
Management
Municipal
Manager
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SUPPLY CHAIN
MANAGEMENT UNITS
• SCM Units required to be established
within all municipalities and municipal
entities
• Where possible, unit must operate
under Chief Financial Officer or an
official to whom this duty has been
delegated in terms of S79, 82 and 106
of the MFMA
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COMMITTEE SYSTEM FOR
COMPETITIVE BIDS
• The following committees are required
to be established in terms of the SCM
guidelines:
• Bid Specification Committee
• Bid Evaluation Committee
• Bid Adjudication Committee
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COMMITTEE SYSTEM FOR
COMPETITIVE BIDS cont.
BID EVALUATION COMMITTEE (BEC)
COMMITTEE ROLE
•Evaluate bids received in
accordance with specifications and
the points system (Preferential
Procurement Regulations)
KEY CONSIDERATIONS
In addition to the specifications and
the points scoring, the BEC must
assess:
•Each bidder’s ability to execute the
contract;
•Whether municipal rates and taxes and
municipal service charges are not in
arrears;
•Consult National Treasury’s Register for
tender/bid defaulters before making
any recommendations.
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COMMITTEE SYSTEM FOR
COMPETITIVE BIDS cont.
BID EVALUATION COMMITTEE (BEC) cont.
COMMITTEE COMPOSITION
KEY CONSIDERATIONS
•Cross-functional team comprising
at least one SCM practitioner and
officials from the department
requiring the goods and/or services.
•Check with NT’s database that the
recommended bidder is not prohibited/
restricted from doing business with the
public sector. (Verification will be sent
within 2 days of forwarding the details of
the contractor to
[email protected].)
•Submit a report with
recommendations regarding the
awarding of the bid or any other related
matter to the Bid Adjudication
Committee.
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COMMITTEE SYSTEM FOR
COMPETITIVE BIDS cont.
BID EVALUATION COMMITTEE (BEC) cont.
PANEL
•A panel comprised of experts will
evaluate the functionality portion of
bids for the appointment of
consultants.
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COMMITTEE SYSTEM FOR
COMPETITIVE BIDS cont.
BID ADJUDICATION COMMITTEE (BAC)
COMMITTEE ROLE
•Must consider the
recommendations and reports from
the Bid Evaluation Committee and
either (depending on the official
written delegations):
•make the final award;
•make a recommendation to the AO
to make the final award; or
•make another recommendation to
the AO on how to proceed with the
relevant procurement
KEY CONSIDERATIONS
The BAC must ensure that:
•All necessary bid documentation has
been submitted;
•Disqualifications are justified and valid
and accountable reasons/motivations
were furnished for passing over of bids;
•Scoring has been fair, consistent and
correctly calculated and applied;
•Bidders’ declarations of interest have
been taken into account;
•Any other relevant facts which could
affect the awarding of a contract.
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COMMITTEE SYSTEM FOR
COMPETITIVE BIDS cont.
PLEASE NOTE:
• Neither a member of a Bid Evaluation committee,
nor an advisor or person assisting the Evaluation
Committee may be a member of a Bid
Adjudication Committee.
• The AO may at any stage of the bidding process,
refer any recommendation made by the BEC or
the BAC back to that committee for
reconsideration of the recommendation.
• No municipal councillor or public sector official
should be allowed to do business with the State.
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SUPPLY CHAIN
MANAGEMENT POLICY
S111 of the MFMA is very specific in the requirements of a
Supply Chain Management Policy (SCMP) within a
municipality and gives Effect to S217 of the Constitution. The
SCMP must
• be fair, equitable, transparent, competitive and costeffective;
• comply with the regulatory framework for municipal
supply chain management;
• be consistent with other applicable legislation and with the
national economic policy concerning the promotion of
investments and doing business in the public sector;
• not undermine the objective of uniformity in SCM systems
between organs of state in other spheres;
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DELEGATION OF SUPPLY CHAIN
MANAGEMENT POWERS AND DUTIES
CONTRACT
AMOUNT(VAT
INCLUDED)
SUB-DELEGATIONS ALLOWED
Above R10 million
May not be sub-delegated by an Accounting Officer
Above R2 million, but
not exceeding R10
million
May be sub-delegated but only to:
•Chief Financial Officer (CFO)
•A senior manager; or
•A Bid Adjudication Committee (BAC) of which the CFO
or senior manager is a member.
Not exceeding R2
million
May be sub-delegated but only to:
•Chief Financial Officer (CFO)
•A senior manager; or
•A manager directly accountable to the CFO or senior
manager; or
•A BAC not including the CFO or senior manager.
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ETHICS AND CODE OF
CONDUCT IN MUNICIPAL SCM
“Corruption and maladministration are inconsistent with
the rule of law and the fundamental values of our
Constitution. They undermine the constitutional
commitment to human dignity, the achievement of
equality and the advancement of human rights and
freedoms. They are the antithesis of the open,
accountable, democratic government required by the
Constitution. If allowed to go unchecked and unpunished
they will pose a serious threat to our democratic state".
Former President of the SA Constitutional Court (Judge Arthur
Chaskalson), 2000
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COMBATING ABUSE OF THE
SCM SYSTEM
It is the responsibility of the AO, through the SCMP to
provide measures:
• To take reasonable steps to prevent abuse of the
SCM system;
• To investigate all allegations against an official or
other role-player of fraud, corruption, favouritism,
unfair or irregular practices or failure to comply with
the SCMP and where justified
• Take appropriate steps against such official or role-player;
• Report any alleged criminal conduct to SAPS;
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SOME THOUGHTS ON
IMPROVING OUR SCM
• CAPACITY BUILDING
• WHISTLEBLOWING
• RECOGNITION OF
HONEST SCM STAFF
• MORE MGT. VIGILANCE
• STREET – WISE
INTERNAL AUDIT
• MORE VISIBLE PUBLIC
PROTECTOR
• CREATE A CULTURE OF
PRIDE AND
PROFESSIONALISM
• NATIONAL “CLEAN SCM
CAMPAIGN”
• SPECIAL VUNA AWARD
• PROFESSIONAL BODY
OF SCM
PRACTITIONERS
• WEB – BASED FORUM
• RESOURCE CENTRE
• BENCHMARKING
• SHARE BEST
PRACTICES
• POLITICAL WILL
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CONCLUSION
• TOGETHER WE CAN DO IT FOR OUR
BEAUTIFUL COUNTRY…
54
NKOSI SIKELELEL’ iAFRICA !
ACKNOWLEDGEMENT
• ACKNOWLEDGEMENT TO B RANDALL
AND C ROBINSON FOR WORK ON
WHICH PART OF THIS PRESENTATION
IS BASED
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