Safeguarding business integrity

Procurement fraud, is a detrimental practice plaguing businesses in particular and Zimbabwe’s economy at large. It poses a significant threat to financial stability and operational integrity.

This article shall look at the intricacies of procurement fraud, how it is perpetrated and suggest measures and steps towards its prevention.

What is procurement fraud?

Procurement fraud encompasses any dishonest and deceptive practices employed during the acquisition of goods, services, or works. This fraudulent activity involves manipulating procurement processes for personal gain, resulting in inflated costs, substandard quality deliverables, and unfair advantages to unscrupulous actors.

From bid rigging and collusion to kickbacks and misrepresentation of information, procurement fraud schemes come in various forms, undermining the fairness and competitiveness of procurement activities.

Why procurement fraud is on the high side in Zimbabwe

Procurement fraud in Zimbabwe is at the high side.

Both internal auditors and external auditors’ reports are flagged with reports of procurement fraud.

In July 2023, Brian Dube, the chairperson of the Parliamentary Portfolio Committee on Public Accounts, highlighted the presence of loopholes in the public procurement systems that facilitate misinvoicing, casting a shadow on the country’s efforts to achieve its goal of becoming an upper-middle-income economy by 2030, largely driven by ambitious infrastructure projects subject to rigorous tendering processes.

Dube lamented the staggering financial implications of corruption, citing specific examples of financial haemorrhage across various ministries and sectors such as the agricultural sector, ministry of healthy, ministry of transport entities like the Zimbabwe National Roads Administration (ZINARA).

Moreover, the ramifications of corrupt practices is said to have significantly impacted state-owned enterprises such as the Grain Marketing Board (GMB) and Zimbabwe Electricity Supply Authority (ZESA), leading to multibillion-dollar losses within these vital entities.

The detrimental impact of corruption on Zimbabwe’s economic landscape cannot be overstated, as funds that could have been directed towards essential services and national development initiatives have been siphoned through fraudulent means. The urgency to address these systemic issues is underscored by high-profile cases that are recorded everyday.

Transparency International-Zimbabwe (TIZ), an anti-corruption organisation, believes shrouding public procurement in secrecy promotes wasteful expenditure of public resources and hence should be talked about in public. In Zimbabwe, discussing fraud is often avoided similar to how conversations about witchcraft are avoided.

People in Zimbabwe hesitate to identify a witch even if they are aware of someone practicing witchcraft.

Consequently, individuals refrain from speaking out, leading to silence on these matters and allowing them to persist unaddressed, sometimes resulting in individuals passing away without disclosing the truth.

There are several reasons why procurement fraud is on the rise in Zimbabwe. These factors include:
Lack of oversight: Inadequate oversight and monitoring mechanisms in the procurement process leading to loopholes that fraudsters can exploit.

Corruption: Corruption within the procurement system allowing individuals to engage in fraudulent activities in exchange for personal gain.

Economic challenges: Economic hardships in the country push individuals to engage in fraudulent activities to make ends meet or to enrich themselves.

Weak enforcement of laws: There is a lack of enforcement or consequences for those caught engaging in procurement fraud and this allows others to commit similar acts.

Lack of transparency: Lack of transparency in the procurement processes create opportunities for fraud to occur without detection.

Methods of committing procurement fraud

In Zimbabwe, procurement fraud often surfaces through schemes such as vendor collusion, invoice manipulation and conflict of interest. Dishonest vendors may collude with internal staff to secure contracts through inflated pricing or falsified documentation.

Additionally, employees with procurement responsibilities may engage in kickback schemes, accepting illicit payments from suppliers in exchange for awarding contracts.

These fraudulent activities not only erode financial resources but also tarnish the reputation of organisations and hinder economic progress.

As Zimbabwe strives to rebuild its economy and fortify its governance structures, tackling procurement corruption and enhancing transparency in public expenditure processes are imperative steps towards restoring public trust, promoting sustainable development and combating the scourge of corruption that has plagued the country’s progress.

Strategies for preventing procurement fraud

Combating procurement fraud requires a multifaceted approach integrating proactive measures and robust controls. Organisations in Zimbabwe can adopt the following strategies to mitigate the risks associated with procurement fraud: Implement stringent due diligence processes: Conduct thorough background checks on vendors and suppliers to verify their credibility, financial stability and ethical practices before engaging in business transactions.

Enhance transparency and accountability: Maintain detailed records of procurement activities, including bids, contracts and vendor communications, to promote transparency and accountability at every stage of the procurement process.

Strengthen internal controls: Establish segregation of duties, regular internal audits, and monitoring mechanisms to detect anomalies and prevent collusion among employees involved in procurement functions.

Encourage whistleblower protection: Create channels for employees and stakeholders to report suspected fraudulent activities anonymously, ensuring protection against retaliation and promoting a culture of whistleblowing.

Provide ongoing training and education: Offer comprehensive training programmes on ethics, fraud awareness, and compliance to equip employees with the knowledge and skills to identify and prevent procurement fraud effectively.

By taking proactive steps to curb procurement fraud and instilling a culture of integrity and compliance, businesses in Zimbabwe can safeguard their financial resources, enhance operational efficiency and bolster trust among stakeholders.

Efforts to hold accountable those engaged in fraudulent activities, bolster oversight mechanisms and strengthen anti-corruption frameworks are crucial in fostering a climate of integrity, accountability and effective governance for the benefit of all citizens.

As the country works towards promoting ethical business practices and sustainable economic growth, addressing procurement fraud is paramount in fostering a conducive environment for business success and prosperity.

Rtd Major Zhou is a senior lecturer at Great Zimbabwe University and has the following academic accolades: (FACCA,FCGI,MBA, MCOM ACC.B.TECH ACC,FORENSIC AUDITOR & PAAB).