An irregular expenditure governance strategy for South African state-owned entities

Abstract

National government’s efforts to prevent irregular state expenditure have mainly focussed on the municipal environment, although there has been an increase in irregular expenditure by stated-owned entities (SOEs). This growing trend is driven by inept SOE-employees, careless procurement practices, and failure to comply with legislation—specifically regulations relating to supply chain management policies and procedures. The aim of this study was to investigate the disconnect in a governance framework, struggling to prevent irregular expenditure by SOEs, and to suggest a governance strategy that is proactive, rather than reactive. From the departure point, the study paradigm and design followed a post-positivist and constructivist approach, where a sequential mixed-methods design was employed to conduct a content analysis, IQA focus groups, and interviews. The literature review revealed that irregular expenditure principally related to contract adjudication—highlighting that most of the irregular expenditure types are assigned to the act of assessing bidding requirements, to award contracts to suppliers. This finding informed the proposed governance strategy. The proposed governance strategy is anticipated to improve the governance framework regulating irregular state expenditure and improve the financial governance of SOEs in South Africa.