Ethical procurement practices and the impact on state-owned enterprises, the procurement profession, and small and medium enterprise development
Zucky Bauleth-Nashima and Lusia Kornelius
In Namibia, public procurement is rigorously administered and regulated under the Public Procurement Act and related regulations, ensuring fair participation in economic activities and equitable opportunities, particularly for Small and Medium Enterprises (SMEs). The private sector, particularly SMEs, is crucial to the production and supply of goods and services, playing a vital role in ensuring availability, operational efficiency, and sustainability. However, there has been a notable demand for goods and services in offices, Ministries and Agencies (OMAs). This adversity has heightened the need to go beyond local supplies and extend the sourcing of goods and services to regional and international spheres.
Moreover, the local supply chain faces significant challenges such as a shortage of demanded goods and services due to the absence of or poor manufacturing capacity. In certain instances, the local manufacturing underproduces owing to its high operation costs, high utility fees and overhead costs. On the other hand, there have been issues of unethical conduct reportedly affecting administration, execution, and compliance with the procurement act. The Public Procurement Act in its entirety advocates for accountability, transparency, integrity, consistency, effectiveness, and efficiency. This act regulates more than 179 State-Owned Enterprises (SOEs) in different categories, demonstrating a deliberate purpose in increasing not only regulatory capacity but also administrative processes. It also stipulates that the procurement thresholds exceeding the SOEs’ prescribed limits should be handed over to the Central Procurement Board of Namibia (CPBN).
Although there seems to be a well-structured and regulated framework, there is room for improvement in carrying out the procurement processes and ensuring enforcement during execution. The rising unethical conduct and corruption activities in the OMAs undermine the rule of law and foster mistrust in government programmes, causing mismanagement of public funds, thus resulting in poor service delivery and economic stagnation in the country. The unethical conduct has a direct negative impact on the development and growth of SMEs. The brown envelope practices take away the opportunities for meritorious awards. Awarding companies on merit not only ensures ethical conduct and compliance with law, but it also safeguards OMAs in terms of quality and reliable goods and services.
Lack of accountability within OMAs has contributed to significant oversights resulting in inflated prices, huge financial losses, and poor quality of goods and services. The Anti-Corruption Commission, tasked with investigating and enforcing the corruption act, has been particularly under public scrutiny and reminded about the reinforcement of legal repercussions for those contravening the law. This underscores the necessity for collaboration among all stakeholders in the fight against corruption, including the private sector. By working together with the stakeholders’ sector, one can ensure compliance in the entire supply chain management and procurement pipeline.
Ethical training for SMEs is essential in fostering insights and understanding of ethics and protocols within the procurement system. Conversely, a lack of ethical culture can lead to significant negative consequences, including legal issues, job losses, and reputational damage. As the saying goes, “You do not know what you do not know.” However, cultivating a culture of inquiry and a willingness to learn can help individuals understand the policies and regulations governing acceptable practices. Without ethical consideration, the private sector, particularly SMEs—as the main providers of services—faces increased risks of unethical or illegal practices. This negligence can also result in supply chain disruptions and harm to consumers and the environment.
Namibia can learn from other countries that have successfully implemented procurement systems to gain valuable insights and identify areas for improvement. In Africa, Rwanda has been frequently recognised for its innovative e-procurement system called Umucyo, which has achieved significant adoption. Additionally, South Africa is noted for its public procurement reforms and policy reviews, particularly in addressing corruption, legislative fragmentation, and enforcement strategies. On a global scale, China has developed a robust public procurement system that effectively manages a large number of suppliers and public demands while emphasising cost-effectiveness and efficiency. Furthermore, the US federal government has successfully established clear procurement requirements for acquiring goods and services through government contracts.
We believe that investing in local manufacturing and production capacity is essential to increasing local content to 65% or more. This investment should focus not only on popular sectors such as mining, fishing, and agro-processing but also on other areas of the economy, including household goods, instrumentation engineering, chemical manufacturing, and the furniture industry. Currently, the manufacturing sector faces challenges such as high production costs and legal and environmental issues. We believe that the government can support local manufacturing, particularly for small and medium-sized enterprises (SMEs), by establishing industrial manufacturing parks similar to Ramatex. This initiative could help meet local demand and sustain production.
Enforcement of the Anti-Corruption Commission policy can enhance good business practices, and through a joint commitment, the Commission can educate and create awareness on corruption and work more closely with the private sector. For example, signing Memoranda of Understanding (MOUs) on anti-corruption cooperation between anti-corruption units and private sector organisations can be beneficial. The objectives outlined in these MOUs should require both the public and private sectors to commit to fair and just practices, as well as to fostering a culture of transparency. This commitment must comply with all applicable laws and regulations related to anti-corruption.
Professional bodies typically regulate ethical standards, enabling member competence through licensing, certification, training, and development. The absence of local procurement professional bodies has a significant impact on procurement professionals, ethics, performance, and accountability. Without regulatory bodies, both professionals and service providers may engage in unethical behaviour without the risk of repercussions. Many local procurement professionals depend on international organisations such as the Chartered Institute of Procurement & Supply (CIPS). These bodies, while important to general procurement principles, may not align with local regulations or the specific procurement environment in the country. The establishment of a local procurement professional body, similar to the Health Professional Council or the Engineering Council of Namibia, would facilitate the enforcement of ethical standards. This body could provide training and implement disciplinary measures. Additionally, it could contribute to policy development, research, and collective efforts to combat corruption. Furthermore, it would promote good business practices and foster an ethical culture within the procurement process.
Benchmarking procurement practices against those of other countries is crucial for improving efficiency, identifying areas that need enhancement, and staying competitive. By comparing performance metrics, organisations can uncover best practices, identify potential cost savings, and adapt to evolving trends and technologies in procurement. This process also helps organisations understand their market position and develop strategies for future growth and risk management.
Although procurement is well administered and regulated, it still faces multiple challenges related to operations, legislative matters, and ethical compliance. Concerns about unethical conduct among professionals are prevalent within Namibia’s procurement system. These challenges can lead to financial losses, operational inefficiencies, self-enrichment, and economic downturns, while also creating unfair competition within the SME sector. To address these issues, measures such as supporting local manufacturing, fostering public-private collaborations, establishing local procurement professional bodies, providing ethical training, promoting an ethical culture and benchmarking, among others, can increase accountability and reduce unethical conduct within the procurement ecosystem.
*Zucky Bauleth-Nashima is a technical procurement officer in the health sector and holds an MBA in management strategy, with a keen interest in public health governance. Meanwhile, Lusia Kornelius is a logistics and supply management graduate and an aspiring procurement expert.
