The draft procurement regulations, meant to operationalise the Public Procurement Act, have divided business lobby groups and early indications are that they might be taken on legal review.
This is as the government continues to grapple with enforcing participation in the economy by black people, who constitute the majority in this country.
The draft regulations will, if implemented in their present form, compel companies wishing to do business with the state to prove that at least 40% of their prior procurement was spent on enterprises that are at least 51% owned and managed by blacks.
The regulations also make a big push for local content requirements, among other requirements geared at creating jobs locally, by forcing bidders to buy locally.
Kganki Matabane, CEO of the Black Business Council, said the organisation supports the Public Procurement Act and its regulations.
“The regulations will ensure that ownership patterns of the economy change from the current situation where 7% of the population owns 95% of the economy while 93% of the population (black people ― Africans, Indians and coloureds) only owns less than 5% of the economy,” Matabane said.
“We are 32 years into democracy and need to accelerate the pace of economic transformation.
“It is crucial that the state should use its R1-trillion procurement budget to decisively redress the economy to bury the imbalances of the past. In our view, the government should actually set aside more than 50% of the procurement spend for 51% black-owned companies.”
The regulations are set to be the next battleground in the government of national unity, with DA finance spokesperson Mark Burke saying the party will fight “vehemently” against the draft public procurement regulations.
“Already two flagship DA governments, the Western Cape Province and City of Cape Town, are challenging the underlying law that gave rise to the latest draft regulations and now the DA will oppose the draft regulations with the same fervour.”
The act is meant to replace the 2017 Preferential Procurement Policy Framework Act (PPPFA) regulations, which were set aside after a legal challenge by Sakeliga.
Piet le Roux, CEO of Sakeliga, told Business Day the draft regulations are worse than the 2017 regulations and that the organisation is considering its legal options.
“Under the new system, race is no longer a factor in evaluation — it is a condition of entry. For contracts up to R20m, entire tenders must be set aside for racially defined groups, with targets that reserve 30% of an institution’s annual procurement budget for black people alone,” Le Roux said.
“Notably, these set-asides require that these companies must be 100% black-owned, which is effectively also saying that black people wanting to qualify for state business should avoid taking on any white partners ― basically, penalisation of black people who prefer to do multi-racial business.
“In substance, this is what Sakeliga had struck down at the Constitutional Court in 2022 — racial predisqualification in procurement — now repackaged on a far larger scale and embedded in primary legislation. With over R1-trillion in annual government spending on goods and services at stake, and state capacity in visible decline, this is indeed a recipe for accelerated state failure.”
The draft regulations are subject to a public consultation process, with stakeholders invited to air their views before they become final.
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