Private sector contributions to government initiatives are on the rise in South Africa. In this article, we provide an overview of current public and private sector collaborations and examine the challenges and complexities of relying on the private sector for service delivery.
Collaboration in South Africa today
The government is constitutionally mandated to deliver services, and it is legally permitted to do so either directly or in partnership with private sector companies. Let's take a look at a simple example: a municipality is obliged to fix municipal roads within its jurisdiction. It can either deploy its employees, equipment and materials, or it can enter into a contract with a private sector company to complete the work. Over the last thirty years, the government has increasingly relied on private sector companies to deliver services on its behalf, be that installing bulk infrastructure like roads and sewerage systems, paying social grants, running prisons, delivering textbooks to schools, or designing and maintaining online solutions for the renewal of a driver's licence or a passport application.
The opportunities are too numerous to list. The private sector plays a widespread role in the delivery of public services and its involvement is expected to grow.
In order to contract with the private sector, the government has to navigate a complex legal framework while making use of established contracting arrangements. For a municipality contracting a private sector company, the endeavour might look something like this: the municipality runs a procurement process to award a tender to a contractor, which must comply with requirements in the Local Government: Municipal Finance Management Act, the Municipal Supply Chain Management Regulations, the Preferential Procurement Policy Framework Act, the Promotion of Administrative Justice Act, by-laws, National Treasury circulars and, in some cases, pursuant to public consultation. If the contract involves the company delivering a service directly to a community, then before the contract can be concluded, the municipality is legally required to conduct a feasibility study, consult with relevant stakeholders, and undertake a public participation process. Further, if the contract imposes financial obligations on the municipality for more than 3 years, the municipality usually needs to obtain municipal council approval, invite public comments on the proposed contract, and solicit recommendations from other government departments. This all applies to relatively standard supply contracts, with a host of additional rules applying to more complex 'public-private partnership' contracts.
The complexity and arduousness of conventional government contracting have spurred the proliferation of innovative contractual arrangements between the government and the private sector. These include unofficial partnerships, memoranda of understanding and donation agreements – outside of the more complex requirements. Well-known examples include various funds established by businesses to support government and personnel secondments from the private sector, including from non-governmental organisations, to bring much-needed capacity to departments holding critical mandates. In such arrangements, the government might not "procure" private sector companies as such. Instead, government and the private sector collaborate in ad hoc, flexible, short-term ventures, steering clear of the public procurement regulatory regime to drive essential strategic initiatives in the public interest. However, the success of these arrangements is contingent on private-sector funding being available for the provision of those services.
Reliance on the private sector
The most widely cited impetus for the private sector's increased participation in service delivery is the government's lack of capacity and resources. The apparent dearth in our civil service of skills, technical proficiency, human resources management and effective leadership, together with the financial burden of state institutions by economic conditions, corruption, financial mismanagement and shallow revenue streams, has resulted in the status quo of government's poor or non-delivery. But of course, these challenges have arisen in the context of increasing reliance on the private sector, raising important questions about how to improve the government's regulatory and technical capacity to effectively oversee and manage performance by private providers.
Facilitating more private sector participation without addressing the root causes of poor or non-delivery is likely to exacerbate the challenges experienced on the ground. Taking over the state's functions, including even its most routine tasks, leaves the state less equipped to do its job, and increasingly dependent on the private sector, in the future. Piecemeal and fragmented support from the private sector, akin to charity work, depends on the goodwill and the politics of the time, making it a particularly unsustainable bloodline in service delivery.
Moreover, shifting the performance of public functions to the private sector raises challenges with respect to legitimacy, mandate, accountability and enforcement, especially when things fail. The Constitution imposes obligations on the government; the government is squarely accountable for fulfilling its obligations, and these can accordingly be judicially enforced. Handing over government functions to private companies can result in a mismatch between the entity mandated to do the job, and the entity doing the job. This in turn can create an accountability vacuum and public misconception about who is in charge. All of which is a recipe for delegitimising the (democratically elected) state.
Similarly, applying innovative contracting arrangements through donations to the state risks overstepping the accountability mechanisms purposively built into the legal framework: the legislated public participation, consultation and approval processes. Agreements are concluded swiftly and responsively but without the same degree of transparency. An informal interface between government and the private sector opens opportunities for abuse, mismanagement, corruption and unfairness. The avoidance of our legal machinery because it's simply too difficult to use, defeats its very purpose: to regulate the relationships between the public and private sectors in accordance with systems that are fair, competitive, equitable and cost-effective.
Privatisation is unlikely the panacea to South Africa's service delivery problems, as many believe it to be. It's no given that the job will get done well, or at all, and without wasteful expenditure or corruption, simply by giving it to a private sector company, instead of government, to do. The flooding of our courts with cases of irregularities in concluding government contracts and subsequent non-performance by private service providers is evidence enough. The substandard delivery of healthcare, electricity, water and rail services by private companies in the United States and the United Kingdom are also glaring precedents not to be ignored. An age-old concern also remains prevalent: that the private sector's increased participation in service delivery has the power to move government decisions or strategies to serve corporate incentives, as opposed to the public interest in accessing basic services.
The future of public-private collaboration to deliver on the government's constitutional mandate will certainly be interesting, especially in the context of the recently enacted Public Procurement Act, and in a government of national unity where views on increasing private-sector participation might not always align. Notwithstanding, private sector participation in the performance of public functions is not new, and to meaningfully harness the expertise of the private sector requires a strong and capable state.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
