Outgoing State Procurement Tzar Kenneth Brown: SA Treasury never been stronger

The true value of a leader is reflected in the sustainability of what is left behind when they depart. Listening to this interview will give South Africans the comfort that outgoing Chief Procurement Officer Kenneth Brown leaves a strong legacy. Given the intense pressure experienced by his team at the State’s centralised “buying office”, Brown’s departure for a top job at Standard Bank got some fretting that this was a victory for the forces of darkness. The 19 year Treasury veteran puts that to rest. Our in-depth discussion explains how Brown has built a powerful waste extractor which doubles as an anti-corruption force to be reckoned with. The procurement team has trebled from an initial 35 people, and will soon have its full complement of 125 in another pocket of excellent with SA Treasury. Brown says his successor is well qualified and the team is young, bright, highly motivated and possessing enormous integrity. He takes us through progress towards fulfilling the 2016 Budget commitment of removing R25bn a year from the State’s procurement spending.  He has no concerns about them withstanding pressure from crony capitalists and tenderpreneurs those who have seen their cash cow removed. Hope Springs. – Alec Hogg

Joining us now on the line from Pretoria is Kenneth Brown, the outgoing Chief Procurement Officer for South Africa. Kenneth, it’s been 19 years since you joined the Treasury, so this is a decision that you must have taken after quite a lot of consideration, you’re going to leave a big hole though.

Yes, I know it is a decision I’ve taken after a long, long talks and all of that. Over a year I’ve been agonising about this, I didn’t take it lightly, so I don’t think I’m going to leave a hole. We’ve established quite a bit of a thorough team. The guy who will be taking over here has been seasoned. I was off last year for six months and the guy was acting, so the same guy is taking over all of that, so yes things will continue.

Who is replacing you?

Schalk Human, he’s going to be acting until the position is permanently filled.

All right, but he knows what he is doing and the country will not be left in the lurch?

No, he knows how to do that. He is actually driving the entire automation part of SEM and he’s the lead negotiator on all of these deals that we’re negotiating with Microsoft Property Landlords, with Telkom and all of those guys, so he’s at the forefront of those things, so I think we’re in good hands.

Kenneth, it’s a big job and not all South Africans can understand quite the extent of the work that you’ve done, but when we go back to the budget in February this year, the Finance Minister, Pravin Gordhan allocated you with the responsibility of cutting out R25bn in waste in the next three years, are you able to tell us, are you making progress towards that end?

kenneth-brown-sitting
Kenneth Brown

Yes, we are making serious inroads in that. The example and I think he carried it very well in his paper recently on Telkom, where we’ll have R400mn, R500m for Microsoft deal. Microsoft doesn’t want us to talk too much about the numbers on it. Microsoft spends about R2.2bn, at least we spent R2.2bn on Microsoft licences in South Africa, and the deal that we’ve negotiated with them will give us a discount of anything between 15 and 32 percent on existing licences, so it should translate into a substantial kind of savings there. We’re finalising a property management strategy that we will implement from 1 April next year. Government will need to make a call on property ownership versus leasing, and actually take a decision on disposing of property that government doesn’t need, really non-strategic kind of property. To give you an example government owns close to 45 000 residential homes occupied by different people. If we were to just dispose, even if we were just to give those houses away just as an example, we could save about R4bn to R5bn on maintenance costs, rates and taxes, etcetera, so there’s a combination of things there that are in our way. We’re finalising and partly implementing our travel policy strategy. Government spends R10bn on travel. There’s a potential to save another R2bn to R3bn there. We have introduced and made it compulsory that when people procure infrastructure that they need to do it in terms of our infrastructure standards, so we have even written to the competition commission to give us a bit of advice on how we need to deal with the professional fees in construction because that’s where the big killer is. Government spends close to R200bn, if not more annually on infrastructure and that’s where a lot of the inflated pricing actually comes in. To give you an example, if the fee is based on the value of the project, the people tend to overinflate the value of that particular project, so something that would cost us R100mn and the guy must get ten percent of that, means R10mn, they would rather say that the thing will cost you R300mn and get R30mn in fees on it, but then the knock-on effect is that the people that must go and procure that infrastructure, for them they think the thing should cost us R300mn, so at the end you find that we’re paying a huge premium actually on infrastructure and if we were to actually rationalise that entire regime, the fees part of it, we’re going to save a hell of a lot of money on the infrastructure side there and we have interacted with the construction industry extensively. The construction industry have given us pointers where government actually gets it wrong related to infrastructure, but also contract management and infrastructure needs to improve in government. We have a stop start kind of attitude towards many of our projects. That adds to costs and this issue that government doesn’t pay its creditors on time is a huge problem. If we look at one or two of our infrastructure related departments, they owe some of our suppliers close to R4bn. Many of these construction companies, they normally leave site and when they come back many of the infrastructure they must do from scratch, so how do you manage infrastructure? In itself, I think the R25bn target and just a few examples that I give you is something that we can easily reach. If I were to add up a few things that we have already done, we’re close to R5bn or R6bn a year that we are already saving and this is just on the margin stuff.

Just to elaborate maybe a little bit more on the process that you were explaining about inflation of contract. You went to Parliament and spoke to them about a prison’s contract which if we just go back to that was awarded at R378mn. A bid of R90mn was turned down. Your feeling was that it could have been done for R50mn, so there’s a massive inflation which again emphasises or illustrates the point you’re making. The question though is what’s happened to that as an example that has been flagged for the country.

No, I’ll touch on two or three things for you. The one thing that we saw as quite a bit of a drawback in our supply chain management system was the issue around strategic sourcing and its role in procurement, which is the preplanning part basically for procurement where people actually need to do market research, understand what our markets say, what suppliers and players are in the market, at what prices do they come in, etcetera. So many of our, and it’s not only this prison tender, it’s across the board, that research is lacking in many areas. We’re pushing the systems so that at least we build a capacity on the research front, but the second thing that we are doing is the issue around the lack of consequence in the system because surely if you have the example that you’ve given there and no action is taken against anybody related to that, then surely that is basically a problem. Now the spending committee and public accounts tender bodies/committee have insisted that the anti-corruption task team must form part of the work that they do, right and in this regard every case basically that has been to the ACTT that gets investigated by the Hawks or whatever relevant authority there, that gets logged actually in Skopa’s own register and Skopa is starting to track what the progress on many of these particular cases because we are now pushing to create quite a bit of a deterrent in the system and Skopa is basically taking this thing in a very serious light. So we hope with some of these interventions in particular ways will start to stop the rot wherever we basically pick it up, but also deal with many of the inefficiencies and the corruption, that frankly you need a well-functioning, integrated justice system.

And if you don’t have a well-functioning integrated justice system?

I must say, and this is the point that I keep on raising when I talk to people, even today I said it to a few people. I say you see people expect miracles from the Treasury and from the office to deal with many of those things, even the ones where there’s no consequences in it and we have actually over the past few months and a year or two, found very good allies even with civil society, because the more you bring these things up in the public, the more careful people become in dealing with many of these things. One of my chief directors who is responsible for governance monitoring and compliance, he regards me now and then with many of the anecdotes that would come through to his office, where people out there have become very conscious of the work that we do as the office of the Chief Procurement Officer, so much so that if people do things wrong on the other side, people know that we are there to actually deal with many of the things, but I don’t have a clear-cut answer for you. If the integrated justice system actually is not working the way we hope one in a democracy should work, I think it is difficult to intervene in many of these things and that’s the reason why we are also pushing the legislatives in Parliament, to start to at least play a big role in oversight and making sure that the system functions, to think that Treasury on its own will succeed with that, I think it’s going to be a tough ask for us.

Kenneth, while we’re talking about those kinds of issues, Mzwanele Manyi had made some very serious allegations against you. Has that contributed at all to raising the pressure for you to make the decision that you’ve had to leave?

Mzwanele Manyi
Mzwanele Manyi

No, not really. He has raised that in the past two to three months. For me the decision to leave I had taken a year ago and in June when I spoke to the Minister of Finance and told him that I had this offer, that I was leaving and all that, he really asked me to stay for six more months, so we then negotiated with my future employer on this and then my future employer agreed that I start there in January. My departure has been long coming there and it has nothing to do with the allegations that has vented around me on this.

What motivates that, what have you done to aggravate certain people so much that they make some, which seem to be pretty wild claims about your personal life?

No, they are wild claims. You know, the challenge with this job is, and the next person who is going to come and do it will experience the same and many of my people here are already experiencing it, is once you put measures in place that brings in efficiency, it means money that shouldn’t have been at a particular point at some place is moving in another direction and away from certain groupings, you’re bound to have a tax actually coming your way. Let me give you a simple example. We introduced the central supply database last year, we introduced the etender portal, we made it compulsory that people advertise the tenders on the etender portal and we do away with newspaper adverts. That intervention alone has saved government about R500mn to R600mn a year. I had the editors of all media houses complaining and they actually came to see me in my office and we had an interesting robust kind of interaction, but when they understood where we are as a country, what we want to achieve and the wastage there and how modernisation takes us forward and the benefits of what we’re doing, you know you could see that you’re talking to reasonable people here who have the interest of the country at heart themselves, so it was easy for them to comprehend that, but the same cannot be said all over whether it’s travel agents that you talk to, property owners that you talk to and all of that. You’re dealing with a plethora of people who would experience the changes that we’re bringing through in a different kind of way and they may react in a different way. The allegations that are coming through… There were numerous secret investigations thrown at me and many of these missiles have missed, and I don’t’ think even this one, I jokingly say, I don’t think it will even launch you see, so Alec, it is the nature of the work and will always call attention to you and people will try and dig with that, so whoever comes here must be ready for that. When I took on the job I understood the risks of the job and I thought, “Look here, I’m going to make the sacrifice for South Africa and our country, my country too and no matter what comes my way I will face head on”.

You said that you made a decision a year ago. Now it’s just over a year ago that Pravin Gordhan was reinstated as finance minister. The events led up to that what we call Nenegate, did that influence your decision?

No, in fact what happened, last year I was out of action for about five months. I had a huge back operation, I have six screws in my back, and when I came back I had quite a lengthy conversation with Minister Nene in September and I indicated to him that for the sake of my health as well, I think I need to slow down because really this operation took the sting out of me and I said, “Look here, let me really relax” so it had nothing to do with the politics of the day. When Nenegate actually happened I was even out of the country at the time. When I came back, the Monday Minister Gordhan basically came in and the discussion of me leaving was put aside because then it was a matter of saying “Look here, it must be all hands on deck, you don’t want to create instability now, given the challenges that we are faced with” and that part actually delayed my departure from the Treasury.

We’ve now had the opportunity to reassess what happened at Nenegate, how vulnerable is the Treasury to another attack like this, i.e. what the Public Protector talked to us about state capture?

Alec, to be honest, I think the Treasury is in a much stronger position now than it was a year ago. I certainly really think that we are in a much stronger position now and more organised and yes, I don’t think we’re more vulnerable than we were a year ago.

The past year working with Minister Gordhan, we’ve seen him age visibly through all the pressure that’s been put onto him, are you comfortable that he’s still steadfast, he’s still able to wave that flag?

No, he’s still steadfast; he will wave South Africa’s flag. He has done it; I mean you’ve seen him in his roadshows selling South Africa in the midst of all adversity that is there. He’s done remarkably well and looking at him now, I think he’s more than ready to continue for another few years. That’s my assessment of it.

SA Finance Minister Pravin Gordhan
SA Finance Minister Pravin Gordhan

People will be interpreting your departure in various ways, is there any hope that you can give him that from what you see it is bulwark of this democracy, the Treasury that things are strong and stable?

Frankly, my own assessment from the office where I am and the work that we do as a team here, I think you must remember we established this office from two business units. We are now six different business units doing quite different things. We were a staff compliment of about 35 at a time, we’re now at 93. In the next few months we should be standing at 125 and looking, I mean I was really astounded by it, when I had a staff meeting on Tuesday to bid my farewell and I looked at the whole team in the room and the energy that was in the room and the age profile, by the way, of the team that’s here now excluding a few of us old guys, the age profile is anything between 26 and 36 and 40, so we’ve brought in quite a bit of very well-selected vibrant youngsters that I think will take whatever agenda that needs to be taken forward and with the integrity and actually the tenacity that this job requires. I have no doubt in the ability of this particular office even in my essence to continue to grow stronger and stronger. Incidentally the DG, he repeated it twice at the Minister’s Exco and with the team there of the need to further strengthen this office, so actually I’m quite confident that in the next year or two we’re going to see greater investment this particular office. Talking about the Treasury broadly, you must remember many of the deputy directors general that have been appointed here recently have just been promoted in the past two years or so, some very young and who have brought a lot of skill and insights on the table. Very impressive guys, dynamic, and you could see with people leaving the Treasury at my level, they’re going to the World Bank or the IMF and all of that, they never left it like you felt that there’s a gap, so I’m quite confident that even within the current environment that we find ourselves in and the changing environment that we expect in the next year or two, I think the Treasury will continue to grow from strength to strength.

Kenneth, you’re saying the people who are coming in, this younger group, the next wave if you like have integrity, are they well-qualified though, would you say they were perhaps better qualified today academically as well as emotionally and motivated than, say 20 years ago?

Picture: Twitter @Lion_for_Truth
Trevor Manuel. Picture: Twitter @Lion_for_Truth

No, the crew that we continue to get in, and I’ll talk from experience from the people that I’ve actually recruited in the past two and half to three years, they’re well-qualified SEM guys and ladies, some of them with relevant, let’s say relevant kind of experience, but that brings the dynamics that dimension of millennialism into the thing of how to do things quite differently in a new way etcetera, so they are really kind of qualified but what happened, I wouldn’t say kind of, they are qualified and extremely so, otherwise we wouldn’t have actually hired them for the job, but it will take a year or two for them to get greater experience and all of that and many of them have passed through that year or two already. In fact, some of them when they interact, I went with the Deputy Director to go and see the Director General of Health across the road on some health contracts that we needed to revamp and rethink and all of that. The way this deputy director lady was articulate in explaining many of the aspect of her work and what needs to be done, I was impressed and when we left the DG of Health called me and asked me “At what level is this lady?” and I said “No, it’s the deputy director”. Then she said “but this lady knows more about the stuff than even some of my directors and field directors”. That’s how we’ve selected many of the people that we have here and the confidence and part of my management by the way, coming through from the Trevor Manuel era, you know Trevor used to say “Look here guys, when you write a memo to me even if you are a chief director or director or deputy director general, you must write down there who authored this memo, who wrote it really because when I call you and I ask you, you will refer me to that person. I actually want to talk to that person directly if I have a question and by just putting a deputy director or even an assistant director’s name on the memo has actually upped the ante for those assistant and deputy directors because they knew that they can’t write rubbish on these kinds of memos”, so even my management style, I’ve adopted that kind of thing to expose these guys basically even at that kind of lower level and some of them are actually passing some of the tests that we’ve heard of and tested, we put before them, they’re passing them with flying colours, so I am quite confident that the new breed that we’re bringing in with a bit of nurture and greater guidance, I think they will flourish in the Treasury.

Pockets of excellence like, I guess what one used to see in the early days of SARS after Pravin Gordhan took over there?

Yes, I’m talking about those kinds of pockets of excellence. I was fortunate here because I needed to start something from scratch, so I could establish and bring people in and do that, but even if you were to go into tax policy and you were to go into economic policy and parts of our public finance units, you get young, vibrant youngsters that are coming into the system and they stand their own ground there and they are with a wealth of knowledge, so I am quite confident that the Treasury that you see today is the correct Treasury for the challenges that the Treasury faces today. You must remember when we started in the Treasury, me now 19 years ago; no more in arrest of the thing, the challenges were completely different. We were more confronted by building and organisation, everybody was accepting this organisation. Now you’re in an environment where the organisation basically itself is not only a challenged in terms of its academic ability to deliver things, but it is being challenged right round in different ways, so the kind of person that you need today is completely different from the kind of person that you needed a few years back and I think the Treasury is strong enough to withstand quite a bit of that and to positively contribute to South Africa incorporated.

Kenneth, just to close off with, you own next move, are you able to tell us about that, where you’re going?

Yes, I’m heading off to Standard Bank; I’m going to deal with the public sector there.

Well, that’s a wonderful acquisition for Standard Bank and a wonderful servant of South Africa, Kenneth Brown, and the outgoing Chief Procurement Officer of South Africa. You’ve left me with a lot of hope, Kenneth and I’m delighted to believe that you feel the same way about the team that you are leaving behind.

Yes, look here, I’m actually delighted to have built led quite a bit of a capable team, but also I need to pay tribute to over 20 000 supply chain management practitioners in over 1000 procuring entities in government. Many of these people are faced with huge challenges in their entities and their departments and all of that and many of them are fighting against all odds to make sure that South Africa functions. All that we do is provide the strategic support and all of that, but they are at the cold face of these things and it is actually a tribute to that, but there also needs to be a tribute to be made to all South Africans. It’s amazing Alec, the kind of support that we get from South Africans, ordinary people in the street, it is mind-blowing. I mean I was stopped by an entrepreneur who as aid to me “You know Kenneth, with some of these simple things that you guys are doing there, my business grew from a R2mn to R3mn to a R300mn business and the intervention and the things that you guys put in place” so people really appreciate the work that we do. In my conversation with staff and I said to them, “You know, you people don’t understand, you underestimate how you are appreciated by South Africans”. I said to them, “You know, when people ask you where you work, you say you work for the National Treasury, you’ll get a lukewarm, ‘Yes, yes, good, good’, but if you tell them that you work in the office of the Chief Procurement Officer, people lift and they take your hand, they congratulate you, they encourage you to do this and they agree and it just shows you the spirit of South Africans and how they appreciate the work that we do and I must say it from the bottom of my hear, thanks to all South Africans and people who support us because ultimately, this is our country, it needs to function properly for a future generation, not for us only here, but for generations basically to come and for you in the media Alec and the rest of the people in the media, you have actually been instrumental in bringing a lot of things to the fore and also helping us to tackle many of the challenges that are out there and we also want to thank you guys for the contribution that you’re actually making.

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