South Africa's Treasury said on Tuesday it had received complaints about the abuse in some provinces and municipalities of the requirement that 30% of public procurement contracts be subcontracted to designated groups, as provided for in the Preferential Procurement Regulations, 2017.
The Treasury said some people were allegedly demanding that they instead be paid in cash, 30% of the value of each contract awarded, threatening to interrupt or stop the implementation of projects if their demands were not met.
"Such practices are not only illegal, but defeat the government objective of transforming the South African economy through equal opportunities for all and the advancement of historically disadvantaged individuals and small, medium and micro enterprises," it said.
The department said some organs of state were using procurement preferences that were not provided for in the current regulatory framework, including the ring-fencing of procurement for service providers and suppliers living within certain geographical areas.
"State funds spent on tenders awarded in this manner will be classified as irregular expenditure since they do not comply with the supply chain management and preferential procurement provisions and prescripts," it said.
It called on provincial treasuries to report any interruptions to public projects on the basis of the 30% subcontracting requirement to law enforcement agencies.