Difference between revisions of "Tenderpreneur (South Africa)"

‘Tenderpreneur’ is a South African colloquialism for a businessperson who uses political contacts to secure government procurement contracts (called ‘tenders’) often as part of reciprocal exchange of favours or benefits. The term is a portmanteau of ‘tender’ (to provide business services) and ‘entrepreneur’. Today, ‘tenderpreneurs’ are associated with corruption, nepotism and clientelism. This is because the award of many tenders is driven by informal interests and/or political affiliation, rather than the requirements of formal procedure. The informality of ‘tenderpreneurship’ thus resides in these extra-legal social and political relationships.

‘Tenderpreneur’ is a South African colloquialism for a businessperson who uses political contacts to secure government procurement contracts (called ‘tenders’) often as part of reciprocal exchange of favours or benefits. The term is a portmanteau of ‘tender’ (to provide business services) and ‘entrepreneur’. Today, ‘tenderpreneurs’ are associated with corruption, nepotism and clientelism. This is because the award of many tenders is driven by informal interests and/or political affiliation, rather than the requirements of formal procedure. The informality of ‘tenderpreneurship’ thus resides in these extra-legal social and political relationships.

</ref>). On the one hand, it was associated with the advancement of black entrepreneurs who entered into the private business sector on a legitimate basis under the framework of state policies to enable the advancement of ‘black designated groups’ in commerce and industry. Thus the South African Constitution, in terms of Section 217, permits organs of the state to implement preferential procurement to advance opportunities for persons previously disadvantaged under Apartheid (Constitution 1996<ref>Constitution. 1996. ''Constitution of the Republic of South Africa, Act 108'' of 1996 https://www.ru.ac.za/media/rhodesuniversity/content/humanresources/documents/employmentequity/Constitution%20of%20the%20Republic%20of%20South%20Africa%201.pdf</ref>). These policies successfully enabled commercial opportunities for black businesses as partners and outright suppliers, who would otherwise struggle to compete within a private sector dominated by established white owned businesses. Key policies to advance this objective include the Preferential Procurement Policy Framework (PPPFA 2000<ref>PPPFA. 2000. Preferential Procurement Policy Framework Act, 2000. ''Government Gazette'' 416 (20854), 03 February 2000; 618, No. 40553, 20 January 2017 http://www.treasury.gov.za/divisions/ocpo/sc/PPPFA/Preferential%20Procurement%20Policy%20Framework%20Act,%202000%20(Act%20No.5%20of%202000).pdf</ref>) and the Black Economic Empowerment (BEE) Act and subsequent Broad-Based Black Economic Empowerment Act (BBBEE 2004<ref>PRECCA. 2004. ''The Prevention and Combatting of Corrupt Activities Act 12 of'' 2004 http://www.justice.gov.za/legislation/acts/2004-012.pdf</ref>).

</ref>). On the one hand, it was associated with the advancement of black entrepreneurs who entered into the private business sector on a legitimate basis under the framework of state policies to enable the advancement of ‘black designated groups’ in commerce and industry. Thus the South African Constitution, in terms of Section 217, permits organs of the state to implement preferential procurement to advance opportunities for persons previously disadvantaged under Apartheid (Constitution 1996<ref>Constitution. 1996. ''Constitution of the Republic of South Africa, Act 108'' of 1996 https://www.ru.ac.za/media/rhodesuniversity/content/humanresources/documents/employmentequity/Constitution%20of%20the%20Republic%20of%20South%20Africa%201.pdf</ref>). These policies successfully enabled commercial opportunities for black businesses as partners and outright suppliers, who would otherwise struggle to compete within a private sector dominated by established white owned businesses. Key policies to advance this objective include the Preferential Procurement Policy Framework (PPPFA 2000<ref>PPPFA. 2000. Preferential Procurement Policy Framework Act, 2000. ''Government Gazette'' 416 (20854), 03 February 2000; 618, No. 40553, 20 January 2017 http://www.treasury.gov.za/divisions/ocpo/sc/PPPFA/Preferential%20Procurement%20Policy%20Framework%20Act,%202000%20(Act%20No.5%20of%202000).pdf</ref>) and the Black Economic Empowerment (BEE) Act and subsequent Broad-Based Black Economic Empowerment Act (BBBEE 2004<ref>PRECCA. 2004. ''The Prevention and Combatting of Corrupt Activities Act 12 of'' 2004 http://www.justice.gov.za/legislation/acts/2004-012.pdf</ref>).

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Tenderpreneurship is distinguishable from other forms of manipulation of the system of black empowerment in the scale of economic theft. Under the objective of advancing opportunities for black business advancement, state organs have instituted regulations to enable favourable procurement through two tracks, one via a system of three competitive quotes, ‘3Qs’ (below a value threshold) and via tenders (above a value threshold) (Corruption Watch 2014<ref>Corruption Watch. 2014. ''Understanding Corruption in Tenders'' http://www.corruptionwatch.org.za/wp-content/uploads/2015/06/Corruption-Watch-Understanding-tender-corruption.pdf</ref>). Both tracks have resulted in system manipulation. In the early 2000s, terms such as the ‘3Qs’ emerged to describe black entrepreneurs who had acquired state contracts via the competitive quote pipeline, though these were usually of smaller value (Personal communication to Charman, Limpopo entrepreneurs).  

Tenderpreneurship is distinguishable from other forms of manipulation of the system of black empowerment in the scale of economic theft. Under the objective of advancing opportunities for black business advancement, state organs have instituted regulations to enable favourable procurement through two tracks, one via a system of three competitive quotes, ‘3Qs’ (below a value threshold) and via tenders (above a value threshold) (Corruption Watch 2014<ref>Corruption Watch. 2014. ''Understanding Corruption in Tenders'' http://www.corruptionwatch.org.za/wp-content/uploads/2015/06/Corruption-Watch-Understanding-tender-corruption.pdf</ref>). Both tracks have resulted in system manipulation. In the early 2000s, terms such as the ‘3Qs’ emerged to describe black entrepreneurs who had acquired state contracts via the competitive quote pipeline, though these were usually of smaller value (Personal communication to Charman, Limpopo entrepreneurs).  

In some of the most celebrated cases of tenderpreneurship, the tenderpreneur seeks to cultivate a relationship with politicians (and their families) by supporting and financing their careers. The most famous example of this is the relationship between President Jacob Zuma and the Gupta family, comprising the three brothers Ajay, Atul, and Rajesh. Originating in Uttar Pradesh, India, the Gupta brothers immigrated to South Africa in 1993 to establish a foothold for their emerging business, which included Sahara Computers. The Guptas swiftly established political patronage with ANC leaders. In the early 2000s, the Guptas had begun to invest in Jacob Zuma as a future president. The family cultivated their relationship with the future President via employing members of his household, including one of his wives, a daughter, a son and a nephew. Newspaper reports and studies have complied evidence that the Guptas have channelled funding to support Zuma and his political career via employment, favours, bribes and kickbacks (Pauw 2017<ref> Plaut, Martin. 2017. ‘A Crushing Defeat for the Dark Side’. ‘British Journalism Review‘, 28(4), 37-42.

In some of the most celebrated cases of tenderpreneurship, the tenderpreneur seeks to cultivate a relationship with politicians (and their families) by supporting and financing their careers. The most famous example of this is the relationship between President Jacob Zuma and the Gupta family, comprising the three brothers Ajay, Atul, and Rajesh. Originating in Uttar Pradesh, India, the Gupta brothers immigrated to South Africa in 1993 to establish a foothold for their emerging business, which included Sahara Computers. The Guptas swiftly established political patronage with ANC leaders. In the early 2000s, the Guptas had begun to invest in Jacob Zuma as a future president. The family cultivated their relationship with the future President via employing members of his household, including one of his wives, a daughter, a son and a nephew. Newspaper reports and studies have complied evidence that the Guptas have channelled funding to support Zuma and his political career via employment, favours, bribes and kickbacks (Pauw 2017<ref> Plaut, Martin. 2017. ‘A Crushing Defeat for the Dark Side’. ‘British Journalism Review‘, 28(4), 37-42.

In governance terms, tenderpreneurship has two major implications. First, tenderpreneurship is (rightly) associated with poor service delivery and over-charging of the state, with tender often awarded to companies lacking competency. It is not uncommon for tenderpreneur companies to be registered for the sole purpose of accessing a state procurement opportunities through preferential bidding (Corruption Watch 2014<ref>Corruption Watch. 2014. ''Understanding Corruption in Tenders'' http://www.corruptionwatch.org.za/wp-content/uploads/2015/06/Corruption-Watch-Understanding-tender-corruption.pdf</ref>). The preselection process enables corrupt government officials to bias the procurement outcome towards companies deemed to be eligible of high BBBEE status, ignoring matters of competency that is only considered in subsequent phases of the process. In many instances, tenderpreneur companies exist as shell organisations that sub-contract out to other contractors (often established white owned businesses) to do the actual work. This process is known as ‘fronting’ (Bolton 2006<ref> Bolton, Phoebe. 2006. ‘Government procurement as a policy tool in South Africa’. ''Journal of Public Procurement'', 6(3), 193.</ref>). Over-charging for goods and services means that both the tenderpreneur and their client in the state can extract profits from the fulfilment of the tender. Where tenderpreneurship results in poor service delivery, this in turn undermines public accountability and fuels mistrust towards government officials.  

In governance terms, tenderpreneurship has two major implications. First, tenderpreneurship is (rightly) associated with poor service delivery and over-charging of the state, with tender often awarded to companies lacking competency. It is not uncommon for tenderpreneur companies to be registered for the sole purpose of accessing a state procurement opportunities through preferential bidding (Corruption Watch 2014<ref>Corruption Watch. 2014. ''Understanding Corruption in Tenders'' http://www.corruptionwatch.org.za/wp-content/uploads/2015/06/Corruption-Watch-Understanding-tender-corruption.pdf</ref>). The preselection process enables corrupt government officials to bias the procurement outcome towards companies deemed to be eligible of high BBBEE status, ignoring matters of competency that is only considered in subsequent phases of the process. In many instances, tenderpreneur companies exist as shell organisations that sub-contract out to other contractors (often established white owned businesses) to do the actual work. This process is known as ‘fronting’ (Bolton 2006<ref> Bolton, Phoebe. 2006. ‘Government procurement as a policy tool in South Africa’. ''Journal of Public Procurement'', 6(3), 193.</ref>). Over-charging for goods and services means that both the tenderpreneur and their client in the state can extract profits from the fulfilment of the tender. Where tenderpreneurship results in poor service delivery, this in turn undermines public accountability and fuels mistrust towards government officials.