Where were the Certificates of Good Standing when the tender was submitted?
“In this present crisis, government is not the solution to our problem; government is the problem.” Inaugural Address, Ronald Reagan, Washington, D.C. 20 January 1981.A source in the Ministry of Finance tells me a staggering amount of money was banked by the State Revenue Fund from 01 to 22 September after the ministry issued a directive that no supplier will be paid by the government, if Certificates of Good Standing from various institutions can not be produced.
This is extremely good news as it provides a glimpse of what is possible once an independent revenue agency is up and running. Just by bringing cold tax payers into the fold, the government’s finances will experience a major boost. To this, the short-lived September Good Standing directive, is testimony.
I believe this directive was based on good intentions but like all drastic measures it also produced a number of unintended consequences. In this regard, it was obvious that the finance ministry had to renege on their own intentions simply because so many public suppliers could not produce the Certificates of Good Standing, resulting in impeded cashflows, in turn resulting in defaults on their VAT payments. This is to be expected in a country where the government has an iron grip on the economy, contributing around 44% directly and an estimated 65% if the multi-plyer effect is taken into account.
Ronald Reagan was spot-on in more than one aspect in his famous inaugural speech. He also said “It is no coincidence that our present troubles parallel and are proportionate to the intervention and intrusion in our lives that result from unnecessary and excessive growth of government.”
Now that applies as much to the 1981 USA, as it does to the 2016 Namibia. Reagan was speaking at the end of a high inflationary period whereas we are only entering the inflationary cycle. But the outcome will be the same. Inflation was eventually brought under control by Reagan through an aggressive process of balancing the budget. If we do not revert to a balanced budget within the next five years, our outcome will be the same. Then the new president, at his or her inauguration speech in 2020 do not need to write a new address. Reagan’s speech can simply be borrowed. It will convey exactly the same message.
The idea of forcing suppliers to the government, to obtain Certificates of Good Standing, is as solid as one can get. What turns my mind into spaghetti though, is thinking back along a trail of logical deductions.
If these suppliers had to be paid by government, it means they had to provide a service or delivered goods to a government department or agency. For them to be able to do this, they had to put in a tender following the procedures and regulations as laid down by the tender board, or in the case of local authorities and minor agencies, according to their own tender rules. One of the basic tenets of a successful tender is that the tenderer has to include the required Certificates of Good Standing as part of the tender submission. Now, since many of these tenders are of relatively short duration, and since Certificates of Good Standing are valid for 2-months, 6-months or one-year periods depending on the issuing institution, how is it possible that their tenders could have been accepted without the certificates?
You see where I am going? A successful tenderer should have had the Certificates of Good Standing at the beginning of the relationship with the government department or agency. If all tenderers complied with this, and all accepted tenders were above board, why the sudden, drastic scramble for new Certificates of Good Standing, and why the massive amount of money flowing into the State Revenue Fund in only three weeks and one day.
This implies, the tenderers, or at least a majority of them, did not bother to include Certificates of Good Standing at that point where the tender was submitted. Again, the finger is pointed to those public servants who accepted the documents and allocated the tender without due regard for the regulations in place.
The scramble for Certificates of Good Standing inconvenienced hundreds of other law-abiding businesses who all duly file their Certificates of Good Standing together with the rest of their tender documentation.
The good thing from this exercise was that it forced a whole bunch of non-compliant worms out of the woodwork to quickly bring their taxes up to date. The bad thing is it created an huge amount of resentment among those businesses who comply with all statutory obligations.