He told members of the Chartered Institute of Purchasing and Supply Management of Nigeria who visited him in Osogbo that his administration only amended some sections of the law to correct the abnormalities in it.
The governor, who had earlier been decorated as an honorary member of the institute, which was conferred on him in absentia in 2001 when the institute was not chartered, said that the amendment was done in a bid to correct sections of the procurement law which was deliberately done by some individuals in the past to make them sacred cows.
Aregbesola said with the amendment his administration had institutionalised the law,adding that the exercise was in favour of the institute.
In his address, the institute’s president, Alhaji Muhammed Alliu, said that they were happy over the peace and tranquility that had continued to reign in Osun State.
Alliu described the governor as a leader whose conduct and policies were centered on the people, noting that it was on record that Osun was one of the few states in the federation that had domesticated the procurement law.
By Matthew Campbell, Jesse Riseborough & Franz Wild – May 9, 2013
BSG Resources Ltd., the diamond producer controlled by Israeli billionaire Beny Steinmetz, was among those firms that came calling starting in 2005. The perks allegedly offered: A gift of a $60,000 diamond-studded gold watch and the promise of a $2.5 million commission to Conte’s wife if BSGR got the mining license. In 2008, BSGR was awarded the license.
Today Conte is dead, three people are under arrest and Steinmetz’s $8.9 billion fortune is threatened. U.S. prosecutors are probing whether a man linked to BSGR paid Guinean officials as much as $12 million in bribes for obtaining mining rights to a portion of the site. Citing similar suspicions, the new Guinean government has said it might strip Steinmetz’s company of the license — putting at risk a $2 billion payment he’s due and the reputation of a key figure in the global trade in high-end diamonds.
“As a scion from a notable traditional diamond family, he grew up knowing that what makes a man is his reputation,” said Chaim Even-Zohar, the author of “The Steinmetz Diamond Story,” a book on the billionaire’s business. “My guess would be that he is deeply hurt.”
The allegations of payoffs are detailed in a 28-page report, obtained by Bloomberg, prepared by U.S. law firm DLA Piper. The firm was hired by Guinea at the recommendation of hedge fund billionaire George Soros, 82, who’s advising the government through his foundations. Soros, who regularly backs young democratic governments in eastern Europe and Africa, funded the initial DLA Piper investigation, said a person familiar with the matter who asked not to be identified discussing a private issue. His aim was to provide legal counsel to the government that could match the resources of big mining companies, the person said.
Steinmetz and BSGR, based in Guernsey, deny wrongdoing in Guinea and describe themselves as victims of a conspiracy by current Guinea President Alpha Conde and Soros to revoke the firm’s mining license.
BSGR “became the victim of numerous extortion attempts by individuals who were seeking economic gains,” it said today in an e-mailed statement. “The modus operandi of these attempts involved at times the use of forged documentation, blackmail and harassment. BSGR is confident that its activities and position in Guinea will be fully vindicated.”
The 57-year-old Steinmetz’s troubles show the high stakes for resource firms as increasingly assertive African countries, backed by Western donors and governments, re-open mining contracts to hunt for past impropriety and win better terms for citizens. The probes have slowed development of the Guinea site, known as Simandou, whose mining rights are also held by companies including Rio Tinto Group (RIO) and Vale SA. The mountain-top site contains an estimated 26.5 billion metric tons of iron ore resources, said Paul Gait, a mining analyst at Sanford C. Bernstein Ltd. in London.
“This is the most prospective, highest-grade deposit of as yet undeveloped iron ore in the world,” Gait said.
Born in Israel, Steinmetz grew up in the family diamond business, Steinmetz Diamond Group, founded by his father in 1940. The closely held company specializes in the largest and most valuable stones, among them the 203-carat Millennium Star Diamond unveiled by De Beers SA to mark the year 2000. New York-based Tiffany & Co. (TIF) loaned BSGR $50 million in 2011 to expand a mine in Sierra Leone. Steinmetz also supplies diamonds to New York-based Sotheby’s Holdings Inc. for the auction house’s product line.
The diamond group is valued at about $3 billion, accounting for the biggest portion of Steinmetz’s wealth, according to the Bloomberg Billionaires Index. The family’s other interests include mining, oil, gas and real estate.
“In business he is very hard-nosed, maybe bordering on the ruthless — but always legitimate and fair,” said Even-Zohar of Steinmetz, whom he counts as a “good friend.”
The Simandou controversy traces back to 1997, when London-based Rio Tinto was granted a government license to explore the iron ore mine. In 2008, a few months before he died, Conte stripped Rio of half its license, claiming that it wasn’t developing the site quickly enough. The government then awarded it to BSGR for free, which is typical in the industry. The company began spending $160 million preparing the remote site for mining.
After 18 months, in 2010, BSGR agreed to sell 51 percent of the stake to Brazil’s Vale for $2.5 billion. Vale paid $500 million upfront and the two firms set up a joint venture to develop the site. The remaining $2 billion has not been paid.
“It was an extraordinary deal given its scale,” said John Meyer, an analyst with London-based SP Angel Corporate Finance LLP.
Vale has said it’s not implicated in the investigations.
A New York grand jury started its probe earlier this year into whether BSGR violated the Foreign Corrupt Practices Act by delivering bribes, according to prosecutors. The law bars companies with American links from engaging in bribery abroad. A portion of the alleged payments were sent to the U.S., prosecutors said.
On April 25 the grand jury indicted Frederic Cilins, a French citizen, on charges of witness tampering and obstructing the Guinea investigation. Cilins was described by Guinean Justice Minister Christian Sow as an “agent” of BSGR.
In March he had met in Jacksonville, Florida, with a woman who was wearing a wire, and offered her more than $1 million in exchange for help burning documents related to the BSGR deal, according to the federal complaint.
The woman was Mamadie Toure, a widow of former president Conte who turned FBI informant in the hopes of reducing her own charges, according to a person familiar with the investigation.
The DLA Piper report described Cilins as an intermediary for payments from BSGR to Conte’s wives and for “gifts” to members of the president’s family and government officials. Cilins denies wrongdoing. BSGR today said it sought to work with Cilins and two other men, through a company called Pentler Holdings, from 2006 because BSGR lacked a “permanent presence in Guinea.”
Pentler took a 17.7 percent stake in BSGR’s Guinea unit in March 2006 before it was bought out by BSGR two years later, which is when the arrangement with Cilins ended.
In U.S. federal prosecutions, lower-ranking defendants are often offered lighter sentences in exchange for agreeing to testify against figures more central to alleged crimes.
The Guinean government began reviewing the Simandou license soon after Alpha Conde took office in 2010 as the country’s first freely elected president. Based on the DLA Piper report and its own investigation, the government last month arrested two BSGR employees in connection with the probe: Ibrahima Sory Toure, Mamadie Toure’s brother who was director of external relations, and Issaga Bangoura, a security official. Both men have denied wrongdoing.
BSGR has fought back vigorously. It’s taken aim at Soros, Conde and Rio Tinto, which it says established a “covert special project group dedicated to committing espionage” and harassed its workers by buzzing them with low-flying helicopters.
BSGR has also sued its former public relations adviser, FTI Consulting, accusing it of abetting a “smear campaign” directed by Soros. Soros is “determined to ensure” that the mining license “was withdrawn/canceled” by the government of Guinea, according to the lawsuit. It cited alleged comments by FTI executives that Soros had a “personal obsession” about BSGR.
Soros rejects the claim that he engaged in a smear campaign and that he conspired to strip Steinmetz’s license, a spokesman for Soros Fund Management LLC said in an e-mailed statement.
FTI and Mark Malloch-Brown, its chairman for Europe, the Middle East and Africa, deny working against BSGR and said they will contest the claim. Rio Tinto declined to comment.
Conde, who took office promising to root out corruption, has attracted significant foreign backers. Soros’s Revenue Watch Institute, an offshoot of his Open Society Foundations, advised Conde on a new mining code and anti-corruption measures, the person familiar with his activities said. Global Witness, an anti-corruption group whose advisory board includes Soros’s son Alexander and which he funds, chronicles alleged wrongdoing in Guinea.
And former British Prime Minister Tony Blair established a relationship with Conde through his African Governance Initiative, which set up an office in Conakry, Guinea’s capital, to assist his presidency. Conde last year secured $2.1 billion in debt relief from the International Monetary Fund and World Bank, a recognition of his move to civilian rule.
“The personal relationship between Mr. Soros, Mr. Blair, and Mr. Conde is really important, and has an impact in terms of reassuring leaders that we are going in the right direction,” Guinean Finance Minister Kerfalla Yansane said by phone. “At this juncture we need big support to challenge these companies, who can hire lawyers and PR firms and have resources we don’t.”
Guinea isn’t the only African state where deals with middlemen have led to controversy for international mining groups. Eurasian Natural Resources Corp., a London-based, Kazakh-backed mining firm, is being probed by U.K. prosecutors into allegations it paid bribes to win business in Kazakhstan and Africa. The company said on April 25 that it is cooperating with authorities. And countries including Ghana and Zambia are driving a harder bargain with mining firms, reviewing taxation and state-ownership clauses.
The stakes for getting Simandou mined are high for Guinea, whose population is about 11 million. It ranks 178th out of 187 nations on the UN Human Development Index, which measures indicators of poverty and health.
“The economic growth profile of the country is expected to completely be changed” by the mine, Yansane said.
Rio Tinto CEO Sam Walsh has said the company, which says it has spent $2.3 billion at the site, is committed to developing its portion of Simandou. It predicted production would start in 2015.
BSGR has also said it’s committed to developing Simandou, and remaining in Guinea despite the corruption allegations.
The government realizes the Steinmetz controversy may spook the investors it needs to raiseliving standards, Yansane said. For that reason, “We want this problem resolved as quickly as possible,” he said. “We don’t want the name of the country to be on the front page of newspapers all the time.”
To contact the reporters on this story: Matthew Campbell in London email@example.com; Jesse Riseborough in London at firstname.lastname@example.org; Franz Wild in Johannesburg at email@example.com
- Steinmetz $9 Billion Fortune at Risk in Soros-Funded Bribe Probe – Bloomberg (bloomberg.com)
- Guinea Arrests Steinmetz Group Executives as U.S. Probe Widens (bloomberg.com)
- Steinmetz-Linked Probe Seen Spurring Race for $50 Billion Mine – Bloomberg (bloomberg.com)
- Corruption probe raises questions over Guinea mine’s future (uk.reuters.com)
- Labour peer accused of smearing mining magnate’s firm (guardian.co.uk)
- Billionaire Steinmetz sues ex-adviser over Soros link (theglobeandmail.com)
- Guinea detains official from Israeli mining company in corruption probe (haaretz.com)
By EDGAR BRANDT, 2 MAY 2013
Windhoek — Despite a significant increase in public expenditure, public procurement has not brought about the desired outcomes, such as increased employment, improvement in the distribution of economic opportunities, enterprise development and economic growth and development, the Minister of Finance, Saara Kuugongelwa-Amadhila, told a Tender Board meeting held recently in Windhoek.
According to the finance minister the desired outcomes have not been reached for the most part because of leakages out of the economy. “Many tenders are awarded to foreign companies even where local companies have the capacity to perform these tenders. Goods and services procured under these contracts are sourced from outside, and too many expatriates perform work on the projects under these contracts even where locals have the skills to do so. So resources leak out of the Namibian economy as a result of this and opportunities for learning and enterprise development are forfeited,” said Kuugongelwa-Amadhila.
She added that setting tenders aside for local companies and special target groups such as women and youth for economic empowerment could address these challenges.
Additional tools recommended by Kuugongelwa-Amadhila to address these issues include a policy that some tenders should require mandatory sole contracting of Namibian companies and SME‘s, that there should be requirements for local participation in all companies to be awarded tenders and that there should be a mandatory requirement for sourcing of supplies and labour services from within Namibia.
With specific regard to procurement, the finance minister noted there is a significant increase in expectations from the public for the system to help the country overcome the challenges of unemployment and inequities and to support sustainable economic growth. With public expenditure having increased significantly in the recent past, the government’s role in the economy has grown much bigger. “We should also put in place monitoring and evaluation systems to ensure that compliance with bidding commitments are enforced and that the impact of the procurement programmes is evaluated. Companies that fail to honour their bidding commitments should be held to account,” said Kuugongelwa-Amadhila, adding that the current allegations of corruption and court challenges against the decisions of the board do not augur well for the public image of the board.
Also, she encouraged the Tender Board to look at ways to delegate the adjudication of some tenders to state-owned enterprises, local authorities and regional authorities.
She also revealed that a dedicated procurement reform project office has been set up and recruitment of staff is in progress. “The office will help drive the reform process including assisting with the drafting of the regulations for the new (tender) law once passed, and operational guidelines, as well as the setting up of the procurement advisory office and the new secretariat. I encourage the board to ponder on all the challenges and ways and means of overcoming them,” concluded Kuugongelwa-Amadhila.
by Nyasha Chizu
May 6th, 2013
Public procurement is generally recognised as reactive, responding or processing purchase requisitions as they are raised, thereby relegating the activity to a clerical level.
This is mainly because the public procurement systems are very complicated and are very difficult to innovate for many reasons.
Some of the reasons could be lack of knowledge and expertise of the leaders, rigidity causing failure of the system to adapt to ever-changing business environment. Despite all these limitations, public procurement needs to be efficient to support public finance management systems. How then do we maximise the efficiencies of government budget execution?
A budget is a plan for a specific period that allocates resources to departments and divisions of the state in order to acquire the required goods and services. It is, therefore, a tool for allocation of funds to accomplish national or organisational objectives. In order to maximise the efficiency of budget execution, public procurement must minimise procurement costs through centralised decision making and decentralised execution.
To show innovation, public procurement must facilitate procurement of commonly used supplies by establishing annual unit price contracts for products in continuous demand.
This inevitably raises efficient budget execution when economies of scale achieve savings at a national level. Institutions such as hospital and local authorities have commonly used supplies that can be procured using this system.
The move, if adopted, will not only save on procurement expenditure itself, but also set a budget saving pattern for all government agencies promoting best practices.
Spooling of commonly used supplies would ensure that the public procurement system puts in place appropriate quality management techniques. Lower priced acquisition or reduced budgets will not compromise quality given the implication of poor quality on a national supplier. The volume of the business becomes attractive that no sane businessman would want to lose the contract due to compromised quality.
While the objective of public procurement is to improve efficiency, the systems need to be transparent and fair. There is generally a conflict of efficiency and transparency in public procurement. Private sector procurement systems are generally regarded efficient because of the elimination of bureaucractic procedures that characterise public procurement.
In the private sector, decisions are made fast and buyers are made accountable for their decisions. It might, therefore, be necessary to train in the public sectors to acquire private sector procurement methods for the efficiency of public procurement systems.
Training alone will not be enough, appropriate systems that promote ethical behaviour are necessary. Public procurement officials need to subscribe to a professional organisation recognised by the government so that moral of buyers is upheld.
This is necessary because public procurement requires that personnel are ethical, as it operates amidst commercial interests of numerous bidding participants. Abiding to a set code of ethic will then be mandatory and appropriate punishment for offenders will be enshrined in the system.
To show innovation, public procurement must facilitate procurement of commonly used supplies by establishing annual unit price contracts for products in continuous demand
Procurement can, therefore, assume a leadership role in the efficient use of budgets through adoption of strategies that minimise costs of inputs in the public sector.
By ESTHER MSETEKA
May 6th, 2013
THE Economics Association of Zambia (EAZ) has advised Government to revise the oil procurement process by making it more transparent and efficient.
Last week, Government increased the price of petrol and diesel by KR1.75 (K1, 750) per litre and KR1.63 (K1, 630) litre respectively while kerosene has been adjusted upward by KR1.68 (K1, 680). But, EAZ president Isaac Ngoma said fuel, being a key factor in production and delivery of goods has a significant bearing on the cost structure of consumer prices. Mr Ngoma said there is need to curtail middle-men in the procurement process of for the commodity to be bought at a reasonable price.
“EAZ is of the view that the oil procurement process must be revised to make it more transparent and efficient so that we can procure the product at a good price from credible sources without middle men being involved,” he said.
Mr Ngoma said this in a press response in Lusaka recently. He said the association stands to support economically sound measures that may seem to hurt the nation in the short-term but have pronounced benefits in the long-run.
He said Government has explained the rationale behind the increase, thus the removal of the subsidy which has been in place for a long time.
“We all must know that such subsidies are unsustainable for a small economy like ours and has for a long time imposed significant pressure on the treasury.
The meager resources available are much needed to meet other social needs like in health and education,” he said. Mr Ngoma, however, said due to the raise in fuel prices there is an anticipated increase in the prices of goods and services while the cost of transport will directly affect enterprises and the travelling public.
Mr Ngoma said ultimately, the effect will impact on the inflation rate as price adjustments are inevitable.
What’s a cash-tight government to do when it wants to modernize a hospital, build a railway, or expand the power grid to reach underserved areas? It might explore outside, private sources of financing—that’s where public-private partnerships (PPPs) come in. The acronym has a promising ring to it, yet going back to the 1970s, its impact has been mixed. At their best, PPPs can provide rapid injections of cash from private financiers, delivery of quality services, and overall cost-effectiveness the public sector can’t achieve on its own.
But at their worst, PPPs can also drive up costs, under-deliver services, harm the public interest, and introduce new opportunities for fraud, collusion, and corruption. Our experience at the World Bank Integrity Vice Presidency is that because PPPs most often are geared toward providing essential public services in infrastructure, health and education, the integrity risks inherent in these sectors also transfer to PPPs.
On April 17, the Integrity Vice Presidency convened a public discussion on corruption in PPPs (pdf) bringing together finance, energy, and fairness-monitoring perspectives. Looking at the landscape, in the last eight years, 134 developing countries have implemented PPPs in infrastructure, and in the last decade the World Bank has approved some $23 billion lending and risk guarantee operations in support of PPPs.
Opening the event, World Bank Managing Director Sri Mulyani recounted examples from her previous life as Indonesia’s Minister of Finance. She reminded the audience that while fraud in PPPs can seem abstract, the quality, safety, and human costs are very real—such as when a bridge crumbles after only five years, though it was supposedly built to last 15.
CBS News State Department correspondent, Margaret Brennan, moderated the discussion and did not let panelists get away with being too polite. She tried to pinpanelists (pdf) down on which countries consistently faced the biggest corruption problem, and how we can fix it. As my colleague Rashad Kaldany, Vice President and COO at IFC said, “This happens everywhere in the world, all countries, bar none.” The problem is global, which is why the solutions also should be similarly global and applicable in diverse situations.
If there was a theme to the discussion, it was the desire to level the playing field with global standards on PPP transparency. Roger Bridges, president of Knowles Consulting in Canada, suggested the World Bank design a certification system for transparency and governance. Receiving that certification would be completely voluntary, but also demonstrate a credible commitment and capacity for internal governance. Roger said that ultimately the certification could be rolled into an overall grading system for PPP participants. Participants might, for example, receive 10 out of a possible total of 100 points for being certified. A carrot—not a stick.
Rashad suggested an initiative in the integrity area modeled on the Equator Principles. Start with a few, major international players who agree to standardized practices and principles in PPPs. Once established, media and civil society groups can help mobilize others to sign on, gradually expanding adherence to the principles until they become a broadly accepted norm of conduct.
Establishing new norms sounds like it could take forever, but attitudes and norms can change faster than you think—Paul Clifford said in the past 8 to 10 years he has seen “difficult conversations” with clients about conforming to the Equator principles’ environmental and social standards become accepted as “automatic.”
Corruption is deliberate, serious and bad business. Based on the discussion yesterday, I believe there would be broad support for what I like to call Global Integrity Principles. PPPs are inherently opaque and risky because they are often long-term, complex financial arrangements. Those risks can be reduced if the terms, costs, and benefits are made more understandable and accessible to governments, private parties, and consumers.
The questions we want to address at the World Bank are, specifically: How should integrity due diligence be adapted for PPPs? What do integrity principles in national PPP laws look like? What should regulators do to review concession and other related arrangements for red flags? Are additional disclosure requirements needed to flush out politically exposed persons? And finally, how do we obtain more effective public scrutiny of PPP deals throughout the PPP project cycle?
No doubt, we have a number of difficult and complex issues to sort out. The way forward is to embrace optimism, even though in 1911 Ambrose Bierce described it as an intellectual disorder.
- Public to bear costs of state-guaranteed profits in LRT privatization (bulatlat.com)
- Public-private partnerships a winning strategy (miamiherald.com)
- PPP Law Panel: ‘The state needs the investor and not the other way round’ (dailynewsegypt.com)
- Corruption, time and indispensability (kaieteurnewsonline.com)
- Ministry of Finance promotes PPP agreements (dailynewsegypt.com)
- Japan bank targets PPP acceleration (vietnamnews.vn)
- Stephen King: PPPs need better ways to handle risk (nzherald.co.nz)
By Odidison Omankhanlen – Lagos
April 22, 2013
The Director-General, Bureau of Public Procurement (BPP), Mr Emeka Eze, has said over N420 billion had been saved for Federal Government in the last 15 months through the activities of the bureau on contract valuation.
Ezeh, who was speaking at the opening of a retreat for Chief Executive Officers in Federal Government’s Ministries, Departments and Agencies (MDAs) organised by the Bureau, in Lagos, at the weekend, explained that the said fund was recovered after valuation of contracts that were submitted by contractors, stating that the reduction in contract sum further emphasized the core value of BPP as the drive of public procurement and prudence in public expenditure.
He assured that the bureau would continue to ensure that there was transparency in the bidding process for contracts in the country, stressing that all competent contractors would be given a level playing field to demonstrate their capacity and pass through open competitive bidding process enshrined in the Act.
He explained that the BPP would continue to work hard to ensure the cost of doing business in the country was reduced through the elimination of multiple registration and pre- qualification as well as tendering process that should be increased to give chance for equal competence and capabilities.
“It is important to highlight the Bureau’s effort in promoting transparency, accountability, efficiency and fairness in public sector procurement and the Transformation Agenda of the present administration. The default procurement method remains competitive Tendering, as it is, is the surest guarantee for quality and transparency which PPA 2007 envisages. The direct procurement and selective tendering are the exception rather than the norms,” he said.
On the relevance of the retreat, the BPP boss said it was to identify the deficiencies in the 2012 budget implementation process, so that this year’s budget could be more successful, adding that the participants would also have opportunity to know the procurement process.
He noted that through similar retreats for other public officers, they were now beginning to see public funds as monies to be spent with care, and with high sense of responsibility, adding that these gains were a resultant improved budget implementation and performance in terms of project delivery.
“The benefits of the programme cannot be over emphasized because as it develops, the cost of doing business in the country would reduce through the elimination of multiple registration and pre-qualifications in the various MDAs. The quality of prequalification and tendering process should increase at the end of the day coupled with the better grouping of contractors, consultants and service providers of equal competence and capabilities,” he stated.
Ezeh noted that with the classification of contractors and consultants by the bureau, there will be increased discipline in the Federal procurement process, noting that only capable and competent contractors and service providers would become identifiable and considered for deserving jobs.
He was optimistic that the bureau was working assiduously to consolidate on- going collaboration with the World Bank, the United Nations Development Programme (UNDP), the Washington based International Law Institute (ILI) and the Federal University of Technology (FUTO), Owerri, to establish a public procurement research centre.
Also speaking at the event, Chairman, House of Representatives Committee on Public Petitions, Hon Uzor Azubuike, explained that efficient public procurement is vital to the development of the country as it regulates the developmental capital component of the annual budget.
“Contracts should not be awarded at inflated prices. We should stop giving specific contractors more contracts than they can handle.
Contractors that have records of abandoning contracts should be blacklisted. The BPP should not stop at procurement, but go ahead to monitor contracts awarded to ensure Nigerians get value for money,” he advised.