New legislation promoting the procurement of locally produced goods and services by public authorities, including government departments, state entities and local authorities, has drawn sharply different responses from business organisations.
On Tuesday, President Cyril Ramaphosa signed the Public Procurement Bill into law, which requires all state departments and public entities to use a preferential framework when procuring goods.
The act aims to stimulate economic development by having state organs lean towards purchasing locally manufactured products and services rendered in SA.
The Black Business Council hailed the bill’s signing into law as a “historic moment” that would potentially drive inclusive participation of historically excluded individuals into the mainstream economy.
“In our view, this is the most important legislation, secondary only to the constitution,” it said in a statement. “This legislation will ensure that the state is able to set aside procurement opportunities for blacks, women, youth and people with disabilities.”
Public procurement accounts for a significant portion of government expenditure, running into billions of rand a year, and is a major contributor to GDP.
However, business lobby group Sakeliga criticised the act as “a recipe for accelerated state failure” that was “unconstitutional and harmful”. It slammed the bill for seeking to compel all state entities to procure goods and services “only from an artificially small pool based on race, nationality”, and other criteria, which it said would drive up prices and degrade service delivery.
“This act seeks to severely restrict state entities’ procurement choices, increasing expenses and diminishing service quality while potentially facilitating corruption on an unprecedented scale,” said Sakeliga in a statement.
The organisation said it would subject the final version of the bill to careful scrutiny “to determine appropriate steps in countering it and retaining possibilities for normal, value-for-money procurement”.
Noting that previous legislation on procurement by organs of state was accused of being fragmented and constraining, Ramaphosa’s office said the bill was expected to address weaknesses in the procurement of goods and services by organs of state that have in the past enabled corruption, including state capture.
Proudly SA, the country’s buy-local campaign, commended the effective “reinstatement” of the local content requirements in the public sector, saying this would again benefit all industries that had benefited from similar provisions in the scrapped Preferential Procurement Policy Framework Act.
“Industries and companies producing and supplying these designated items will be able to sustain existing jobs, with much-needed new jobs possibly emerging,” CEO Eustace Mashimbye told Business Day. “Our plea is for all government departments and entities to which these rules apply to fully comply with the provisions of the bill, to avoid the high levels of noncompliance witnessed with the previous preferential procurement regulations.”
Steel and Engineering Industries Federation of Southern Africa (Seifsa) COO Tafadzwa Chibanguza said the provision for designating items, in particular the explicit preferences outlined for the acquisition of locally produced goods and local content, is “critical for driving industrialisation”, though he also pointed out that there was not yet a finalised public procurement instrument.
Seifsa represents 19 independent employer associations in the metals and engineering industries.
The new act, to be administered by the minister of finance, applies to all procurement activities by departments, constitutional institutions, municipalities and public entities.
Calling on the National Treasury to work with speed, the Black Business Council vowed to work alongside the department to ensure regulations — which still have to be developed — would realise the spirit and objectives of the primary regulations.
Nonprofit association the Supply Chain Council lauded the signing as ushering in a new era of efficiency, economic transformation, and support for local production and services.
Council chair Kamogelo Mampane said the enactment of the procurement laws presented both challenges and opportunities for supply chain professionals. They would be at the forefront of driving change, leveraging their expertise to optimise procurement processes and delivering tangible benefits to their organisations and the economy.
However, he said that by implementing standardised protocols and strict oversight systems proposed by the law, supply chain experts would benefit from clearer standards and speedier decision-making processes, enabling them to focus on planning and execution.
“The law aims to minimise bureaucratic delays and reduce opportunities for corruption,” said Mampane. “It signifies a bold commitment to enhancing procurement practices, fostering economic transformation, promoting sustainable development and supporting local production.”
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