Shocking levels of fraud and inflated prices cost South Africa R233 billion

National Treasury is on the hunt for instances of massive wasteful spending by the South African government, which could amount to over R233 billion, Bloomberg reports.

According to South African chief procurement officer, Kenneth Brown, as much as 40% of the country’s R600 billion budget for goods and services is being eaten up by inflated prices from suppliers, and fraud.

Notably, some items bought from suppliers are being sold at a price multiple times higher than what could be bought from a store, Brown said, using an example of the purchase of a paper binding machine which cost R27,500 – 13 times higher than the in-store price.

Recently, leaked documents revealed the same practice happening in the city of Tshwane, were a patronage network of over 40,000 suppliers were acting as middlemen selling common products to the municipality at highly inflated prices.

The transactions were limited to R30,000 a transaction so as to avoid having to go through tender processes, the documents showed.

The Department of Public Works (DPW) has also vowed to recover millions of rands from consultants and construction companies for overcharging on government projects.

To date, the department has issued summons to reclaim a total of about R67 million which was over-paid in two projects.

According to Brown, by clamping down on these kinds of transactions, government can increase its output by as much as 40%, without having to spend a cent.

“We could be building more roads, more schools without even adding more money to the current budget,” he said.

Treasury is in the process of renegotiating contracts – for phones, cars and other deals – in a bid to cut costs.

Finance minister Pravin Gordhan and the National Treasury are under pressure to cut back on government spending to avoid further decline in the South African economy. Reducing the budget deficit is a key action to help the country avoid a ratings downgrade to junk status later in 2016.

However, despite his best efforts, government spending has increased dramatically. A reply to a Parliamentary question on government wages showed that the wage bill for the first four months of this financial year‚ was R23 billion higher than for the same period last year.

More on fraud

Leaked documents reveal shocking plunder in South African municipalities

Government uncovers shocking levels of overcharging for contracts

296 municipal officials fired for fraud and corruption over the past year

This is how much of your money government has wasted this year

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Shocking levels of fraud and inflated prices cost South Africa R233 billion