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    ETHICAL LEADERSHIP: ISSUES, CHALLENGES AND OPPORTUNITIES

    MAINTAINING AND ENHANCING GOOD GOVERNANCE: LESSONS FROM THE SOUTH AFRICAN ARMS DEAL

    Prof Harry Herbert Ballard Head of Department

    Department of Public Management Faculty of Business

    Cape Peninsula University of Technology Cape Town, South Africa

    and

    Adv Yasmin Nanabhay Lecturer/Legal Advisor

    Faculty of Business Department of Public Management

    Cape Peninsula University of Technology Cape Town, South Africa

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    ABSTRACT The paper attempts to evaluate the reasons why corruption is still rife in South Africa,

    despite the enactment of legislation and policies which attempt to prevent and combat

    corruption. The South African Arms Deal is selected as the case-study to test this

    phenomenon from a qualitative paradigm. The paper will analyse and present the

    lessons gained.

    INTRODUCTION

    Ethics and law, professionalism and accountability form the cornerstones of good

    governance amongst governments worldwide. These concepts ought to positively

    influence public governance and non-adherence or lack of adherence thereto may

    inevitably lead to corruption within the public sector. At most schools of public

    administration around the world, these concepts are taught as an integral part of the

    management programmes, to adequately equip prospective public officials, to promote

    and enhance sound ethical behavior. Despite the foregoing, unethical conduct is still

    prevalent in the public sector in South Africa.

    The paper analyses statutes enacted by the South African legislature, most notably, the

    Constitution of the Republic of South Africa Act of 1996.The Constitution places

    immense responsibility on all public officials to conduct their affairs in accordance with

    the democratic values and principles enshrined in the Constitution. Of particular

    importance is the establishment of certain institutions that would strengthen a

    constitutional democracy, as contained in Chapter nine of the Constitution. The paper

    includes a discussion on ethics and good governance in South Africa, with particular

    reference to possible causes for unethical behavior. In this regard, reference is made to

    the King Report on Corporate Governance for South Africa, which although not

    enforceable provides clear guidelines to ensure compliance to corporate governance

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    principles within both the private and public sectors. As a concluding note the paper will

    analyse and discuss lessons gained from the Arms Deal.

    ETHICS AND GOOD GOVERNANCE IN THE SOUTH AFRICAN PUBLIC SECTOR

    A public sector official when employed by any of the three spheres of government,

    namely national, provincial or local, finds him or herself in a very special situation, which

    is to serve the government to which he or she owes obedience and loyalty and above all

    to serve the nation. The latter obligation requires complete adherence to the democratic

    principles and fundamental rights which are enshrined in the basic values and principles

    governing public administration, as contained in the Constitution of the Republic of

    South Africa Act, 1996. Section 195(1)(a) of the Constitution (1996) states that a high

    standard of professional ethics must be promoted and maintained.

    In terms of the foregoing, the public sector official is vested with the following powers:

    • powers of authority (example, to grant or refuse a residence permit);

    • powers to exercise discretion in decision-making (example, to appoint a

    preferential service provider); and

    • powers to influence political office bearers (example, to provide reliable and valid

    information to influence political policy).

    In the exercise of these powers the public sector official must define an ethic “…as a

    singular, logically deduced, self-created and self-chosen choice to think and behave as

    deemed most correct to the individual.” (Gildenhuys, 1996).

    Possible causes for unethical conduct could be inter alia: inadequate control and

    accountability; complicated legislation; inadequate policies, systems and procedures;

    and ineffective management and organizational arrangements.

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    In addition, the King Committee on Corporate Governance developed the King Report

    on Corporate Governance for South Africa, 2002 (King II) which although not

    enforceable provide clear guidelines to ensure compliance to corporate governance

    principles within both the private and public sectors. The King II report propagated an

    inclusive approach rather than an exclusive approach with a greater emphasis on the

    non-financial aspects of performance.

    The King II report (2002) defined the characteristics of good Corporate Governance

    which included the following seven (7) principles: discipline; transparency;

    independence; accountability; responsibility; fairness; and social responsibility.

    Although the King II report was published after the Arms Deal appeared in the public

    domain, the paper will further include an evaluation as to whether, the above principles

    were adhered to during the Arms Deal procurement process.

    PROCUREMENT MANAGEMENT IN SOUTH AFRICA

    The level of public spending and the various sectors in which it takes place, impacts on

    the economy and influences the country’s Gross Domestic Product (GDP). The impact

    can also be global. Furthermore, the impact is also felt by the various communities as it

    relates to the social being and welfare. Government should therefore act ethically,

    equitably and to uphold public accountability.

    Government can ensure the survival of certain sectors of the economy when it decides

    to procure goods and services from that particular sector. Procurement thus enforces a

    divergence of legal, ethical and political aspects. Government therefore has an

    obligation to uphold all the principles of governance especially as it relates to public

    accountability.

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    At the time the Arms Deal case arrived in the public domain, national, provincial and

    local government departments had a large collective buying power with an estimated

    consolidated figure of R 56 billion. The amount constituted approximately 13% of GDP

    and represented 30% of all government expenditure. It is clear that public sector

    procurement had a significant effect on the South African macro economy in terms of

    consumption and investment spending.

    In view of the foregoing, to ensure the effective delivery of services in the correct

    quantity and quality resulted in the Green Paper on Public Sector Procurement Reform

    in South Africa in 1997 – an initiative of the Ministry of Finance and the Ministry of

    Public Works to deal with inter alia:

    • the need for value for money;

    • the need to eliminate corruption;

    • the implementation of procedures of control and accountability;

    • uniformity of procedures, policies, documentation and contract options; and

    • effective monitoring and reporting.

    The achievement of the foregoing was tested during the Arms Deal case-study.

    A broad definition of procurement, as submitted by Du Toit, Knipe, Van Niekerk, Van

    der Waldt and Doyle (2002:202) relates to the whole process of acquisition from third

    parties (including the logistical aspects) and covers goods, services and construction

    projects.

    Du Toit, Knipe, Van Niekerk, Van der Waldt and Doyle (2002:203) cite Baily (1994)

    when utilizing a well known definition of the aim of procurement which is to purchase the

    right quality of material, at the right time, in the right quantity, from the right sources, at

    the right place. Therefore, one of the objectives of procurement management is inter

    alia, to purchase effectively and efficiently and to acquire by ethical methods to obtain

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    value for money. Procurers normally apply the 80:20 principle which hypothesizes that

    80% of the items bought represent only 20% of the total purchase value.

    Du Toit, Knipe, Van Niekerk, Van der Waldt and Doyle (2002:213) state further that the

    same is true for the public sector – in most states the government seldom produces

    through state owned businesses the goods and services that public institutions need in

    order to carry out their activities. Governments therefore, usually resort to the market to

    buy and contract their needs.

    Du Toit, Knipe, Van Niekerk, Van der Waldt and Doyle (2002:215-217) submit three

    core principles of government procurement, namely: value for money; commitment to

    competition; commitment to best practices and innovative procurement processes.

    The first core principle according to the same authors includes all procurement

    decisions which should be based on a comprehensive appraisal of all the options in

    each set of circumstances, such as:

    • the status of the firms involved (example, quality assurance,

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