Blockchain Can and Will End Public Procurement Corruption.

It is an undeniable fact that corruption is one of the main aspects that some African countries are known for. Surprised? I suppose not, because, earlier this year when the 2017 Corruption Perception Index was released, Sub Saharan Africa was the worst performing region, with an average score of 32. From this list, 100 means very clean and 0 means very corrupt. A shocking or not-so-shocking fact is that, no country has ever scored 100. This list is compiled annually by Transparency; a non-governmental anti-corruption organisation. This organisation takes the liberty to rate a total of 180 countries according to their corruption levels in regards to their governments and public services.

One of the low performing countries in Sub-Saharan Africa is Lesotho; a country with a little over 2 million people but with a score of 42, just 10 points above the poor Sub-Saharan average. Analyzing the situation, it is evident that the corruption is due to weak anti-corruption policies and mechanisms, lack of capacity for Anti-corruption institutions to address corruption in the country and lack of access of information for citizens. Due to this, it is no surprise that there is an increasing number of minister and public contracts scandals, that have led to shaken trust between the public and the government.

So, what is the impact of corruption?

It is no secret that corruption affects development. In Lesotho specifically, it has also reduced the economic growth immensely. Most funds have been diverted from serving the public to the government official’s pockets, making them richer, while the public was becoming poorer. In regards to the minerals sector, which plays a significant role in the country’s economy, there has been clear public sector corruption, that serves the private interests of bureaucrats and criminals, while the public does not benefit at all.

The most recent case that is currently being investigated by anti-corruption officials is between Arron Banks, the largest political donors of Brexit and a Lesotho government minister, Mr. Thesele Maseribane. Evidence discovered by the BBC states that Banks have paid £65,000 into the minister’s private account, while seeking a licence to prospect for diamonds in Lesotho. The Hawks state that Banks wanted a foothold in Lesotho’s entities including a “political party, the Postbank, the diamond tender and mining rights…” Coincidentally after the money transfers, the government granted him the mining licence. The money transfers were handled by the Minister’s daughter, of which were followed by an email exchange between the daughter and Banks stating: “My father had meeting with the minister of minings and our application has been approved”, of which Banks replied: ““Finally – now the fun begins.” As much as there is denial of corruption from the minister and Banks, an anti-corruption investigator from South Africa states that putting money in a minister’s private bank account raises questions and a serious lack of transparency.

This is just one instance among many where the granting of tenders and mining rights is not transparent and trustworthy. The are thousands of other instances whereby there has been failure to solicit proposals or tenders from competitors of a favored supplier, restriction of the tender pool, soliciting offerers known to be inferior to favored suppliers, misrepresenting tender documents, accepting late proposals and even rejecting legitimate proposals. Moreover, the biggest cases within the tendering processes in Lesotho, involve high officials taking bribes from bidders and awarding them with tenders and therefore restricting competitive bidding. This has negatively impacted thousands of Basotho, who cannot afford to pay these bribes as they do not get awarded tenders that they sometimes truly deserve. So, what is the most effective way to do this?

Blockchainify the tendering process?

Blockchain is always linked to transparency, which is one aspect that is clearly lacking within the tendering process. According to researchers, in order to ensure a fair and transparent tendering process, the following criteria has to be met:

  • The tendering organisation can open a tender and once it is opened, it cannot be changed. This is to avoid the changing of information so as to favor a certain organisation over others. The tender also has an evaluation criteria for selecting the best bid.
  • Confidentiality within the bidding process and certainty that third parties cannot bid on behalf of other organisations. Moreover, organisations should not know which other organisations have placed bids and how much they have charged. There should not be any tempering of bids. In essence, there should be privacy within the bidding process.
  • The tendering organisation is only allowed to open the bids once the tender is closed and the winning bid will be publicized. This means that the losing bids can evaluate their submissions comparing it to the winning criteria. This information can also be made to the public for analysis of the bidding process.
  • There should be no biases involved. Thus, there should be privacy, integrity and confidentiality. Moreover, the whole process should be auditable and evidence of merit should be provided for the winning bid.

In order to achieve this, researchers have come up with a proof of concept that can eliminate corruption within the public procurement sector, by using smart contracts.

So, how does it work?

  1. The tendering organisation creates a tender as a smart contract and then places it on the blockchain. The smart contract also has a code showing how the bidding evaluation will be done. This code is unchangeable and irreversible.
  2. A bidder can then download the smart contract tender from the blockchain.
  3. The bidder reviews the tender and places their respective bid. This is encrypted so that other bidders cannot see the information of others.
  4. The bidder then pushes their bid as a smart contract to the blockchain and this will be signed by the bidder’s certified key signature. The signature is certified by the bidding organisation against the key signature provided by the organisation during initial registration to become an authorised bidding company.
  5. Upon the deadline of the bids, the smart contract automatically stops accepting new bids.
  6. The tendering organisation can download and decrypt the bids, then run an evaluation code so as to select the best bid. The bid is done through a computer-run evaluation so as to ensure an unbiased outcome.
  7. The results are then pushed to the blockchain, together with the bidders keys and publicized. This allows for independent auditing by interested parties so as to analyse the whole bidding process.
  8. Due to the immutability of the data, citizens can access the tender details and bid evaluation code.
  9. The system also allows for citizens to download the tender contact with the bid evaluation code so that they can run the evaluation so as to ensure fairness of the process.

This process, although currently difficult to deploy, has the potential to ensure secure and transparent tender bidding processes. As much as it is difficult to indeed put into action, there is no denying the fact that it can be done. In essence, multitudes of governments, inclusive of the Lesotho government, can ensure access to information to citizens and offer a secure and and fair process that enables the right allocation of tenders to deserving citizens. It is unfair how multitudes of people are starting up different companies to offer services to the governments, but cannot get the chance to really implement due to existing fraud and corruption. This is unfair as multi-million rands and dollar businesses are benefiting from this as they can afford to pay bribes and “soften up” the government. Deploying blockchain would mean that time’s up for favoritism, bribes and family ties; something that it truly needed in our different governments.

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Nini Rose Moru

I only love my bed and blockchain, I'm sorry.

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