GOVERNMENT has announced its intention to issue a statutory instrument (SI) which will benchmark the pricing index of goods and services in order to plug the drain through public procurement of goods and services.
Minister of Finance Felix Mutati believes Government is losing a lot of resources when procuring goods and services.
Mr Mutati has wondered why a particular item could cost twice its actual price, hence the need to address the issue of government expenditure.
Perhaps, Mr Mutati ought to appreciate the main reasons goods procured by Government are expensive.
Firstly, there are too many middlemen in the chain of supply between third parties and the successful bidders with the ultimate result being high prices for goods and services.
We can also not rule out price fixing and other anti-competitive trading practices designed to hold the consumer -in this case the government-to commercial ransom. Fortunately, we have sufficient completion laws reposed in the Competition and Consumer Protection Act. The Consumer and Competition Protection Commission (CCPC) just need to double its efforts.
Then there are circumstances when tender authorities select suppliers with higher bids – sometimes justifiably so. This immediately shifts the prices upwards.
Then there is the cancer of corruption, which is probably the major driver for high cost of goods or services procured by Government.
Besides, Zambia is a land-locked country and it must be realised that supplying goods and services would be expensive – because of freight, and handling charges on land are costly and risky too if the goods are imported.
There appears to be collusion between the suppliers and the tendering officials to exaggerate the prices so that the two parties can share the excesses – behind curtains.
It is not a secret that Government is the biggest buyer of both goods and services, hence the clamour by both legitimate suppliers and the notorious ‘tenderpreneurs,’ a notorious term for unscrupulous businessmen whose pre-occupation is obtaining government tenders through corruption.
Some of those who tender or show expression of interest to supply do have the means to fulfil the requirements or capacity and the bidders resort to ‘subcontract’ the tender and ask some businessmen or companies to re-supply.
This has the effect of the final prices shooting up exponentially.
In addition, the failure by the bidders to obtain cheap money from the local banks is making it too costly to borrow money to cover importation costs or obtain letter of credit (LoC) – or in some cases bid security expenses – which is a condition to win a tender.
The interest rates from banks for bid security or letter of credit – where a bidder or supplier does not have enough working capital, is also making doing business in Zambia too expensive – invariably, the goods obtained by Government become very expensive.
There is no cheap financing mechanism in the financial banking sector in Zambia. This tends to make doing businesses in Zambia too costly and prices of goods and services are high.
The Bank of Zambia (BoZ) and the ministries of Finance, and National Development Planning must help to bring down the interest rates of borrowed funds from the financial institutions in the country, just as Mr Mutati has been saying over and over.
Rather than craft an SI which will benchmark the pricing index of goods and services, Government should come up with a competitive procurement process for common use items and devise framework agreements
The author is Zambia Daily Mail editorials editor.