How to insulate fertiliser procurement from corruption

There is no part of government operations that is more prone to grand corruption and malfeasance than public procurement. And, where corruption is systemic, the quality of services delivered to the public will be poor because the government will invariably find itself only purchasing goods and services from contractors who give the biggest bribes to officials.

In most cases, the corruption risks surrounding any one large procurement project will especially be high under the following conditions: When the value of the project runs into billions of shillings; when there is an urgency to buy the goods and services; and depending on the level of discretion accorded to the officials.

Enough of textbook theory. I make these remarks as an entry point to a discussion of the government’s fertiliser subsidy programme. There is a strong case, indeed, for more transparency in the handling of this multi-billion-project that we have been running since 2009.

I feel that we have reached a point when we must now put a sharper spotlight on this contract – evaluate the whole programme, study its impact in terms of market distortion and competitiveness – and investigate whether there is still wisdom in allowing the programme to continue being handled by the Ministry of Agriculture and the National Cereals and Produce Board.

What does leaving management of this critical programme mean in terms of corruption risks? As of June 2015, the money allocated to this project stood at a whopping Sh23 billion. The procurement of the current contract took place against the backdrop of incessant rumours and claims about intense lobbying by influential merchants and their political godfathers. Even though evidence of corruption was anecdotal, the tell-tale signs were there. When you see a large procurement being dogged by cancellations re-advertisements, and protracted appeals, it is usually a reflection of political interference of the tender evaluation by powerful individuals.

SENSATIONAL TALES

Players in the fertiliser industry, especially those who participated in the tender tell sensational tales. And when you read the complaints, especially the stuff pleaded before the procurement appeals tribunal over the dispute on the current tender, there is this sensational claim that the difference between the prices quoted by the losing bidder, Ms Haidery P Ltd, and the winner, Ms Export Trading Company, was a massive Sh1.6 billion. The ministry explains this massive difference on the grounds some of the losing bidders failed at the technical stage which meant that their financial bids were not opened. That explanation does not hold water. As a government department- and when you are purchasing standard products sold in open markets such as fertilisers, maize, motor vehicle parts or cement - the rule of thumb is that you must purchase at the lowest price available, taking into account discounts on bulk purchases. Technical evaluations also matter. But they only carry weight when you are procuring complex procurement projects involving technology and civil works. We must remember that international fertiliser prices are published regularly and are, therefore, publicly available. If we wanted to be transparent, reduce the risk of corruption and curtail meddling by political players, we should be thinking about directly negotiating with the existing local private fertiliser importer by using international prices as benchmarks?

MANY YEARS

I have said it before in this column and will repeat that the government must now consider what the Nigerians did in 2012. They had been running a large state-controlled fertiliser subsidy programme for many years.

Due to its popularity, they got to a point when the subsidy was consuming 56 per cent of the federal government’s capital spending. But there was no evidence to show that actual use of fertiliser by small-scale farmers had substantially risen or that food production had increased.

Corruption was widespread as it emerged that that massive diversion of supplies was taking place and that middlemen and rent seekers were benefiting at the expense of farmers. Subsidised fertiliser was routinely smuggled to neighbouring countries. What did the Nigerians do? They removed the Agriculture ministry and state corporations from handling procurement of fertiliser.

The only sure way of insulating the programme from corrupt merchants and capture by well-connected commodity traders and their political godfathers is to remove the Ministry of Agriculture and the discredited National Cereals and Produce Board from handling and controlling imports of subsidised fertiliser.

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