Annual Conference of the Malawi Institute of Procurement and Supply

Good morning.  When Gladys wrote inviting me to speak at MIPS’ annual meeting, I jumped at the opportunity.  I am truly honored to be among such a group of important leaders.  Let’s be clear — you are not just leaders within Malawi’s procurement and supply chain.  You are leaders essential to Malawi’s development, harkening on to the theme of your conference, maybe even transformational leaders. Why do I say that?

You save money – Rules based systems save real money by introducing genuine competition.  This is important for both companies and governments, particularly in the developing world where public procurement accounts for more than 30 percent of GDP (compared to 10-15 percent in developed countries).

You protect your organizations from sourcing risks, avoiding environmental problems and reputational damage.  And as you do this you can change social norms – ensuring, for example, that the tobacco you buy isn’t picked by children or using forced labor.  You can use your purchasing power to ensure the goods you purchase aren’t harming the environment.

You shape company and national development.  Decisions about procurement not only make money, they affect who makes money.  For example, if ADMARC can buy grain immediately after harvest, there are enormous benefits for small farmers; if they wait, poor farmers are often forced to sell at low prices to traders who are the only beneficiaries when markets open late.

As trusted advisors to government and businesses, procurement professionals can help to drive supplier innovation and reduce supply-chain risk.  Procurements can be structured to achieve social and development outcomes, contributing, for example, to increased SME business and job creation.  Babs Omotowa, CEO of Nigeria LNG and former Chartered Institute of Procurement & Supply President talks about how his business used a $1.4bn contract with Samsung and Hyundai.  The deal specified that 600 Nigerians would be trained in shipbuilding and identified materials that could be made in Nigeria.

You even save lives:  Work done behind the scenes to support frontline medical, disaster-relief and charity work means more  money to spend on the ground.  For example, centralising procurement at the American Red Cross helped it save more than $40m in two years, easing an operating deficit that threatened its very survival. Negotiated procurements that changed the cost of anti-retroviral therapies for the treatment of HIV radically expanded the availability of those drugs, and made the “treatment as prevention” tools we talk about today possible.

But just as powerful as the positive impact you can have on your organizations’ revenues and operating margins, – even on the prosperity of Malawi, is the danger posed by corrupt procurement practices.

  • If restricted tenders are issued when there’s no urgency requiring limits on potential bidders…..
  • If contracts are awarded without proper feasibility or environmental impact studies……
  • If “leakage” but also improper procurement and malfeasance make dis-economic dual supply chains necessary…….
  • If prices are set improperly…….
  • If fulfillment clauses are not enforced…..
  • If contract values are inflated because of “exchange rate fluctuations”……

All of these things have been headlines here this year Mlendo ndiye amabwela ndikalumo kakutwa

………Then your organizations’ bottom lines will suffer and people will lose their jobs; then the Malawian government won’t get the best deal for the Malawian taxpayer.  Donor and investor confidence will be eroded.  Public trust in government institutions will be weakened.  Roads can be built to nowhere, natural resources depleted and communities displaced.  There won’t be money in the exchequer to pay teachers and police, keep the lights on in hospitals, or provide life-saving drugs.  People’s lives are on the line.

Your leadership, your transformational leadership, and the professional standards you enforce are crucial to preventing this and crucial to the future of Malawi.

Let me begin by commending The Government of Malawi – in collaboration with MIPS and other stakeholders – for making progress toward reforming the country’s procurement system. The Government has reached a number of crucial milestones:

  1. The enactment of a new procurement law. There are still some issues, I know, with the Act that may need to be resolved by the courts, but Minister Gondwe and the President should be commended for taking up this critical though sometimes unsexy task and convincing other ministries of tis importance
  2. the establishment of the Public Procurement and Disposal of Assets Authority (PPDA) to regulate a transparent and accountable public procurement system,
  3. the ongoing development of an e-procurement system; and
  4. the online publication of procurement and award notices (although that hasn’t been as thorough or as routine as I would like.  Indeed, I understand the PPDA is receiving fewer notices of tenders originating from ministries and departments for posting on the PPDA website than they did before the new procurement law came into force).

But challenges remain – with corruption, with transparency, and ineffective organizational structures.  If there is collusion, even these new checks and balances will be undermined.  I talked with a former senior public procurement official I very much admire about the pressures to look the other way or fix a deal.  He said the pressure from classmates and colleagues, even family members to send a deal their way is something you can overcome.  “They will key off what you put out,” he said.  “If they know you are professional and uncorruptable, that’s how they will treat you.  It’s the fear of losing one’s job when senior officials ask you to collude in a bad procurement that is the hardest to shake off.” Two new procurement official friends of mine reminded me yesterday that another way to express the same idea is that supervisors and government officials need to be reminded to heed professional counsel of their procurement officials and not interfere with good procurements.

To overcome these obstacles, the government must be scrupulous about public procurements.  Proper and thorough documentation of procurement transactions – and good audits of those transactions – is essential.  And here I’ll be pointy again, we cannot attract new private sector investment nor maintain current levels of U.S. government investment in Malawi’s development when funky procurements are commonplace.

The principle of integrity is two-fold. There is the integrity of the procurement process, and the integrity of public procurement practitioners (the principal guardians of the process).  In the procurement process, integrity translates to reliability. Solicitation documents must be reliable and free of uncertainty or predisposition.  They must be vividly clear even to those without specialized knowledge. Highly professional procurement experts in both the private and public sectors must implement good practices under the new procurement law.  That’s you!

It might seem too daunting a task but we need transformational leadership in Malawi’s procurement community now.

We face the same need for transformational leadership in the U.S. government, even at my Mission here in Malawi. Transformational leaders on my team are setting the stage for the next generation of Malawi-U.S. relations.  You may have heard we’re building a new embassy in Lilongwe. This huge investment will define the bilateral relationship long into the future.  How will we make sure our taxpayers are making a cost effective ($200 million) investment? Will my staff be safe and secure in their new workplace?  Will this symbol of friendship endure?  All these questions and more depend, not on my leadership, but on the leadership of our procurement folks.

So I’d like to challenge you to use transformational leadership to improve the overall business environment in Malawi, thus inspiring investors and donors to play a larger role in reinventing Malawi’s economy.  By transforming your industry you can lead the way to a wholesale transformation of the economy – a lofty goal, but that’s what transformational leadership is all about.

I’ll close with a quote from leadership guru Margaret Wheatley: “The things we fear most in organizations–fluctuations, disturbances, imbalances–are the primary sources of creativity.”  While some see these changes as threats, the transformational leader sees them as an opportunity to create, to innovate, to change course toward a better future.  Corruption, mismanagement, collusion – these are all things that can be overcome if we choose not participate.  By modeling ethical behavior we will lead the wholesale transformation   of procurement and supply.  In the process we can open up vast new opportunities for Malawi.

Efficient and effective procurement promotes confidence in the government and in the economy.  If taxpayers, companies and donors can see what is going in and what is coming out, they will invest.  As you deliberate over the next few days on strategies to enhance the Procurement and Supply Chain Systems in Malawi, remember that your commitment to innovation and excellence will drive others to follow you.  As procurement professional you are the gatekeepers to a better tomorrow for Malawi.

Zikomo kwambiri.