A call has been made for an amendment to the Division of Revenue Bill, which divides national revenue between the three spheres of government.
Its purpose is to make the payment of BEE premiums in public procurement transparent and ideally reduce these premiums to zero to maximise value for money in government expenditure.
If adopted, this would mean national and provincial departments and municipalities would have to report on how much they paid in BEE premiums, which is the additional cost of an awarded contract to give preference to higher bids by BEE firms.
The call was made on Wednesday by IRR Legal CEO Gabriel Crouse in a submission during public hearings by the National Council of Provinces select committee on appropriations on the bill, the Appropriation Bill and the Eskom Debt Relief Amendment Bill.
Crouse estimated that BEE premiums as well as waste and corruption cost the fiscus about R150bn a year — R5.7bn in recorded BEE premiums, R11.3bn in unrecorded premiums and R132bn in waste, which could be avoided if the procurement system was simplified to derive maximum value for money.
IRR Legal’s proposals come as political parties seek ways to fill the revenue gap of R13.5bn left by their rejection of the 0.5 percentage point VAT hike due to take effect on May 1.
A recent IRR poll shows that 54.1% of those polled supported value for money only as the criterion for selecting suppliers, 27.6% value for money with race as a tiebreaker if bids were of similar value, 16.6% supported BEE premiums and 1.7% were other criteria.
More than 80% therefore chose value for money in one form or another over BEE premiums. This marked a shift towards greater support for value for money compared with a 2024 poll.
The 2025 poll results among black respondents shows 45% in favour of value for money only, 32% for value for money with race as a tiebreaker, 22% in favour of BEE premiums and 2% other.
Respondents were asked how government, which spends more than R1-trillion a year buying goods and services, should decide who to buy from and were given three options from which to choose.
Crouse referred in his presentation to a Treasury official comment that the BEE preference premium was capped at 25% for contracts under R50m and at 11.1% for contracts over R50m.
Crouse proposed that the Division of Revenue Bill be amended so the conditions on which allocations are made to the national, provincial and local spheres of government, as well as all other allocations, explicitly require transparency of BEE premiums in public procurement and, separately, the reduction of such premiums to zero.
He pointed out that even those MPs who supported BEE premiums should nevertheless want transparency of the premiums paid and those who supported full value for money should also want to know how much was spent on these premiums.
“In short, all members of the committee are urged to unify around the common value of transparency. This can be explicitly guaranteed by simple amendments to the Division of Revenue Bill,” he said.
He noted that the constitution said the bill must take into account the national interest, which retired chief justice Raymond Zondo, chairperson of the commission of inquiry into state capture, said was best served if the government derived maximum value for money in the procurement process.
Crouse said this meant reducing BEE premiums to zero.
Zondo remarked on how preferential procurement had been used as an avenue for corruption, state capture and rent-seeking.
Crouse added that the bill should also be amended to make clear that if these conditions were not complied with allocations would be withheld.
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