Government blacklisting of a company can go further than simply barring the business from state contracts and has far-reaching implications for banking and funding dynamics.
The National Treasury has at its disposal the Database of Restricted Suppliers, which includes entities that are barred from engaging in any business transactions with the government for transgressions that include fraud, corruption, defaulting on contracts, or for serious cases of noncompliance.
Though blacklisting can generally be viewed as more of a procurement measure, it has now become crucial for commercial lending for a bank to look into all these aspects of regulatory compliance to make informed decisions regarding funding applications.
During a parliamentary question, Minister of Finance Enoch Godongwana revealed that of 509 cases referred by the Special Investigating Unit (SIU), only 18 were fully listed.
Godongwana said the delays were caused by inefficiencies in government departments.
“National Treasury can only restrict suppliers when requests submitted by accounting officers are full and comply with legal requirements,” Godongwana told Parliament, mentioning 491 outstanding cases because of incomplete or illegal requests.
ActionSA’s Member of Parliament, Alan Beesley, stated that the lack of movement falls short in the fight against corruption. He said the lack of blacklisting fraudulent and corrupt companies in the registers is a definite sign that there lacks the political will in the fight against corruption.
The Public Servants Association (PSA) has also demanded that urgent steps be taken. In a media statement following the findings linked to the R2 billion Tembisa Hospital scandal, the trade union described the failure to blacklist the 207 implicated companies as a betrayal of public servants and citizens in a statement.
Financial Risk Management Specialist Lerato Mbeki said that despite the fact that blacklisting in procurement is a separate matter from credit reporting, it has not been treated as a standalone area in the financial sector.
“When evaluating business risks, a number of factors, including information held in the credit bureaus, are considered. These include TransUnion, Experian, Compuscan, and XDS, which hold information about default, court judgments, or unsatisfied payments,” she explained.
According to Lee Naik, CEO of TransUnion Africa, lenders are now growing in their application and assessment regarding risk and are no longer relying on traditional and conventional financial data.
“Banks now look at a much wider risk profile, including payment behaviour, public records, and reputation-related data,” he said. “Any negative data, whether that is credit behaviour or governance issues, may have a significant impact on lenders’ willingness or ability to provide credit,” he added.
Naik also clarified that credit restrictions in government procurement and credit bureau listings are two different regulatory instruments, but their combined effect takes place in the lending industry.
Emily@vutivibusiness.co.za
