It might sound a little boring, but the word “procurement” is actually a very important one in development. It is so important that since 2022, there has been an annual “World Sustainable Procurement Day” – today, the 21st of March. But what is the point of the day, and how is it relevant to African countries, especially with its emphasis on sustainability?
The first relevant point is the definition. Procurement is defined as the process of acquiring goods, services, or works from external sources to meet an organisation’s needs or targets. So, whenever a government or bank issues a tender to build a new road or building – that’s procurement. Whenever a government or organisation wants to buy new IT or uniform, procurement is involved. Whenever there is a new contract for services – from tourism to policy advice – that’s procurement.
The second relevant point is that there is a lot of procurement that happens on the continent, both by African and non-African institutions – from governments to banks to NGOs. And this is where the link to development comes in. Because a lot of what African and non-African institutions do is development work, and one of the questions when it comes to sustainability – more in a long-term sense rather than an environmental sense – is to what degree procurement itself is being used to empower and build local African capacity and use local content, or whether it is instead displacing African capacity and content.
This use of procurement matters – we saw that, for example, that during COVID19 African governments found it very hard to procure local PPE, medication and vaccines, primarily because local manufacturing had been crowded out by similar goods procured by international organisations for distribution on the continent that had been totally agnostic to where the goods come from. The lack of local manufacturing has now been acknowledged as a major inhibitor to functioning health systems. There are similar parallels related to procurement of food for development and humanitarian aid on the continent by non-African organisations.
On the other hand, there are many African governments that have preferential procurement policies. For instance, South Africa applies its Black Economic Empowerment and local content development rules to its procurement. In Kenya, a Presidential Directive mandated that at least 40% of the public procurement budget must be allocated to locally produced goods and services. Additionally, foreign tenders are obligated to source supplies from Kenyan contractors at a rate ranging from 40% to 60%. Moreover, the threshold for tenders where Kenyan citizens receive exclusive preference was raised from US$ 3.7 million to US$ 7.5 million.
That said, the impact of agnostic and preferential policies are not often analysed, so today we thought we should share some analysis of procurement outcomes for one of the continent’s most important organisations – the African Union’s Development Agency (AUDA) – formerly known as the New Partnership for Africa’s Development (NEPAD). AUDA-NEPAD can be thought of as the AU’s “think-tank” and as such, AUDA has to procure lots of contracts for knowledge services.
Our analysis reveals that AUDA-NEPAD awarded 70 tenders between 2019 and 2023. These tenders were for various sectors from agriculture, healthcare to education. While AUDA does not have any specific preferential policies for African firms, African firms actually received at least 83% of the tenders while the other 16% were awarded to firms outside the continent! On the surface, this may seem a great result. The only challenge is that the average value of tenders awarded to African firms was US$ 93,591, while those to firms outside the continent averaged US$ 345,191. The disparity in the value of tenders awarded is clear. Why is there such a disparity?
It is difficult to say conclusively. On the one hand, and as revealed in a dialogue we hosted last year on the collaboration between African organisations on development, some African organisations are unaware of rosters or calls for proposals, others have a lack of confidence and time to prepare and bid for higher tenders. On the other hand, there is evidence that large contracts are awarded to firms from high-income countries, as was the case with Chemonics International, arousing suspicion and piquing the interest of the US Congress. And there are many examples of governments and organisations eschewing open procurement processes and turning to international firms because they perceive these firms have superior knowledge, credibility and networks, all of which is not necessarily backed by evidence. The case of Mckinsey’s role in the Nairobi climate conference in 2023 comes to mind, but there are hundreds of others, especially in sensitive yet crucial areas of finance and banking.
So, what can be done to make procurement in Africa more sustainable? Certainly, African governments and organisations, can learn from the good example of AUDA-NEPAD and have as much open procurement as possible. Introducing more preferential policies is also likely to help. While non-African governments and international organisations should – as they’ve been meant to – avoid tying their financial support to non-African goods or services, and ideally also introduce preferential procurement. Last but not least, African firms must also continuously bid for high value tenders as they are equally capable and understand the local situation to provide better goods, better services and better advice!
Do have a read of our graphics on AUDA-NEPAD’s procurement below and do also join us for our next dialogue on the 29th of April to further discuss procurement on the continent. We will share registration details on our social media handles.
To find out how Development Reimagined can support you, your organisation, or Government, please email the team at clients@developmentreimagined.com.
Special thanks go to Leslie Mudimu, Ivory Kairo and Trevor Lwere for their work on the graphics and for collecting/analysing the underlying data and this accompanying article.
The data was only collected via the NEPAD website containing all information on procurement at the organisation.
If you spot any gaps or have any enquiries, please send your feedback to us at media@developmentreimagined.com, and we will aim to respond ASAP.
