National Treasury can't keep track of the R800-billion the state spends on goods and services annually, and can't tell if all the money goes where it is supposed to.

This was the startling revelation from acting chief procurement officer Willie Mathebula, who was the first person to testify at the commission of inquiry into state capture on Tuesday.

He gave evidence in relation to procurement processes and rules and how they are often abused by government departments and state entities.

Asked by one of the evidence leaders, Leah Gcabashe, about the measures National Treasury had in place to keep procurement spending in check and ensure those who abused public funds were held accountable, Mathebula said: "That is a difficult question chair. it's quite difficult. There is a challenge because we can't claim that all this money goes where it is directed to, hence the problem we are facing as a country."

His office, which started keeping an eye on procurement spending in 2013, is conducting numerous probes in a bid to "curb" abuse of funds meant for goods and services, but they face an uphill battle.

"It's a war that we are fighting to make sure there is no abuse of the system. There are still these elements embedded in the system for the intentional abuse of the system," Mathebula told the inquiry.

In the 2016/2017 budget, National Treasury was requested to condone deviations from normal procurement processes to the tune of R74-billion.

Mathebula said much of their investigations were focused on procurement of goods and services by state-owned-entities such as Transnet, Telkom and Denel.

These entities have been at the centre of much of the reported abuse of public funds by the politically connected Gupta family and their acolytes, with indications that most of their looting had been enabled by former president Jacob Zuma.

"There is a directorate within the office of the chief procurement officer that deals specifically with irregularities and abuse of the system. But secondly, within Treasury, specifically within the office of the accountant-general, there is a unit that deals with investigations," said Mathebula.

The public procurement process makes provision for deviations of the tender process under certain circumstances.

Mathebula admitted that Treasury itself may have loopholes in its regulatory frameworks that need to be attended to.

"If you look at what has been happening in the past years, one could ascribe more than 50% of these infractions to abuse of the system," Mathebula said.

He said parastatals have compliance units that must ensure processes were beyond reproach. With almost 20 years work experience at Treasury, Mathebula said his office was battling to keep track of all transactions as these were conducted by internal supply chain management (SCM) units of various state organs.

"Day-to-day procurement of goods and services elsewhere is conducted through SCM units at individual organs of state. Distinct rules that govern individual procurement are formulated at an entity or department level," he said.

Cost fluctuations were a major concern when it comes to procurement, including where a tender initially costs R4-million but eventually balloons to R200-million because of a number of factors, among them corruption.

The inquiry resumes on Friday.