With the revised legislation governing public procurement processes coming into effect this week, stakeholders are expecting the impact of the radical economic transformation within public procurement processes to become clear in due course.
Government repealed and replaced its Preferential Procurement Policy Framework Act (PPPFA) of 2000 with the new Preferential Procurement Regulations, which come into effect on April 1, to further accelerate transformation through its procurement spend and deepened regulation of its tender processes.
“It is worth noting that, while the intent behind the revised regulations is laudable and could be a great driver for economic transformation, there may well be some challenges to their constitutionality or the constitutionality of their application by organs of State,” warned Herbert Smith Freehills director Mzukisi Kota.
The revised regulations set out that government entities in all spheres can set a minimum broad-based black economic empowerment (BBBEE) status level as a prequalification criterion, rendering companies without the desired status level ineligible to tender.
“BBBEE will, thus, now be able to work both as a gatekeeper and as a preference points award factor in government tenders.
“This means that the practice of double counting in respect of BBBEE by organs of State, which the courts condemned as unlawful under the previous regulations, is now legitimised, to a degree, by the revised regulations,” Kota pointed out.
In line with this, AfriBusiness said it was consulting its legal team about the restrictions placed upon businesses, which it believed would sideline white-owned businesses struggling to comply with all the regulations prescribed by the amended Act in addition to the Broad-Based Black Economic Empowerment Act.
“The growth of South Africa’s economy is highly dependent on a democratic system that is based on equality and not on racial preference. The prejudiced scales of justice in this case are already tipped to the point of extremism,” says AfriBusiness manager Charles Castle.
“For the past 23 years, businesses have bent over backwards, conformed and complied with all the legislation and regulations that government has imposed to redress previous inequalities and the promotion of their BEE programmes and policies,” he added.
Werksmans Attorneys director Pieter Steyn previously noted that, under the new regulations, tenders may now include a specific tendering condition that only a tenderer with a stipulated minimum BBBEE status; an exempted microenterprise (EME) or qualifying small enterprise (QSE); or a tenderer subcontracting a minimum of 30% to various EMEs or QSEs, including EMEs or QSEs that are at least 51%-owned by black people, may bid for government tenders.
“The importance of this change is that a tender that fails to meet the prequalification criteria may be excluded from consideration. The new regulations, thus, explicitly allow for a ‘set-aside’ of tenders for firms with a certain BBBEE status and/or small and medium-sized enterprises,” he said in a client brief in February.
The new regulations still stipulated price as the dominant basis on which procurement decisions must be made; however, the 80:20 principle would apply to tenders valued at under R50-million, from a threshold of R1-million. The 90:10 principle will apply to tenders above R50-million.