Research indicates that procurement fraud is the third most reported crime in South Africa.
With rising public awareness on anti-bribery and corruption, public and private organisations are forced to relook their procurement practices – and demand for comprehensive supplier vetting is seeing steady growth in South Africa.
Michelle Baron-Williamson, executive of Managed Integrity Evaluation (MIE), indicates that the company saw increase demand in the number of requests for supplier vetting checks in its 2017 Business Screening Index (BSI) report – compared to data from 2016.
“Just as having good and trustworthy suppliers is vital to a business’ daily and future operations, legislation around anti-bribery, fraud and corruption continue to evolve. Therefore, it is becoming more crucial for public and private organisations to be more proactive and vigilant in managing compliance in their procurement and supply chains through supplier vetting,” says Baron-Williamson.
Whether it’s a business or a government department, legislation and regulation in South Africa continues to place importance on shared accountability in managing governance first, and performance second. This frame of thinking is also being applied to client-supplier relationships. Especially as Government looks to use its own procurement practices and those stipulated in the B-BBEE codes to drive fair employment and opportunities in procurement supply chains in the country.
“What is crucial to understand is that once a supplier is found to have acted in a way, or have business practices that may not be, 100% above board – often the market assumes that the clients knew. While it may seem unfair, the reality is that the clients are often then exposed to many potential reputation and financial risks because of the implied shared accountability. No one wants to experience this and it’s simply not worth the risk to appoint a supplier who may have questionable records,” says Baron-Williamson.
Comprehensive background checks can provide invaluable insights as part of the procurement process. In fact, advance vetting services can highlight any conflict of interest between, or fraudulent activity relating to vendors and employees, identify tender collusion and irregularities.
This ensures procurement compliance, combats fraud and prevents financial mismanagement in the supply chain. Vetting should therefore apply to all partners, suppliers and vendors with whom an organisation does business. Added to this, the act of vetting suppliers – and their relationships with employees – must be conducted regularly, so that any irregularities can be picked up on early and for added assurance.
MIE believes that supplier vetting solutions will increasingly become an integral part of procurement policies and processes, as organisations look to manage and mitigate potential risks associated with an unsuited supplier being appointed.
“This is not to say that vetting checks are not without risk,” says Baron-Williamson. “These organisations have a legal obligation to ensure that any vetting checks required are stipulated in their procurement policy – and that when executed, all checks are compliant with legislation that regulate background checks.
“Navigating the legal obligations and requirements for supplier vetting needn’t be complex. Organisations should therefore look to partner with a reputable service provider – one who is able to offer quality, comprehensive and cost-effective supplier vetting solutions and services that are underpinned by expert guidance and consultations,” concludes Baron-Williamson.