Corruption in public procurement is a high risk for businesses in South Africa. Favoritism in decisions of government officials is perceived to be very common, and public funds are frequently diverted due to corruption (GCR 2017-2018). Nearly two out of five companies indicate that they have experienced procurement fraud in the preceding two years (pwc 2018). Nearly half of South Africans believe that most or all government officials are corrupt (GCB 2015). With the Local Procurement Accord, the government committed to increasing the procurement proportion of goods and services from South African suppliers to an “aspirational target” of 75 percent (ICS 2017), which creates a potential disadvantage for foreign companies. The Broad-Based Black Economic Empowerment (BBBEE) strategy aims to increase the participation of black citizens in the economy but has been criticised both for providing too much preferential treatment in the awarding of government contracts to wealthy black elites and for leading to increased corruption in public procurement (WSJ, Apr. 2014), due to a lack of monitoring and evaluation, mismanagement, difficulties in registering companies under BBBEE, and poor accountability (Shava, E. Dec. 2016). Companies are recommended to use a specialized public procurement due diligence tool to mitigate corruption risks related to public procurement in South Africa.
Serious concerns have been raised about the governance of procurement processes executed by large parastatal companies, as well as the extent to which these companies have become vehicles for political patronage (BTI 2018). A report by the Public Protector concerning state capture questioned a recent deal for Eksom, the country’s largest electricity company, which involved procuring coal from the politically well-connected Gupta family (BTI 2018). Moreover, the National Treasury declined to approve a refinancing proposal for a number of South Africa Airlines (SAA) planes which would have benefitted another politically connected entity (BTI 2018). South Africa’s Passenger Rail Agency (PRASA) made a multimillion order for Spanish locomotives, after a dubious procurement process, that were too large to fit through tunnels in South Africa (BTI 2018). In another high-profile case, President Zuma, received kickbacks from French arms company Thales in return for the procurement of their weapons systems; the charges against Zuma are repeatedly dropped and revived (News24, Mar. 2016). As of March 2018, the National Prosecuting Authority has announced it will prosecute Zuma along with Thales’ local affiliate (News24, Mar. 2018).