The Broad-Based Black Economic Empowerment (BBBEE) Commission says the ruling by the Supreme Court of Appeal that declared the Preferential Procurement Policy Framework Act (PPPFA) Regulations of 2017 invalid, has no effect on the BBBEE Act and its requirements.
The BBBEE Act permits organs of State or public entities to set BBBEE qualification criteria for procurement and other economic activities and to exceed the criteria set out in the Codes of Good Practice through Section 9 (6) of the Act.
The commission also notes that the court’s declaration is not a blow to the BBBEE requirements for tenders.
As such, the commission states that the invalidity of the PPPFA Regulations of 2017 does not invalidate the BBBEE Act.
“The framework for the BBBEE Act and how it is applied is clear and thus not affected by the ruling of the Supreme Court of Appeal.”
In addition, the commission points out that in terms of Section 10 (1) of the BBBEE Act, all organs of State and public entities must apply any relevant Codes of Good Practice issued by the Trade, Industry and Competition Minister Ebrahim Patel in terms of Section 9 of the Act.
This includes determining qualification criteria for the issuing of licences, concessions or other authorisations in respect of economic activity in terms of any law; developing and implementing a preferential procurement policy; and determining qualification criteria for the sale of State-owned enterprises.
It also includes developing criteria for entering into partnerships with the private sector and determining criteria for the awarding of incentives, grants and investment schemes in support of BBBEE.
Taking these requirements into consideration, the commission says Section 10 (1) of the BBBEE Act is mandatory and not optional for organs of State and public entities.
Further, the commission points out that Patel has, in terms of Section 9 of the Act, approved and issued 11 Codes of Good Practice, which are the Generic Codes of Good Practice that are applicable to all sectors that do not have a specific-sector code approved and gazetted by Patel, and ten sector codes, that must be applied in the relevant sectors for which they were approved.
These 11 Codes of Good Practice have set targets for black ownership and other elements, the commission notes, adding that they must be applied by organs of State and public entities for procurement and other economic activities.
Organs of State or public entities are allowed to set the qualification criteria that exceed those set in these Codes of Good Practice with the approval of Patel, under Section 9 (6) of the BBBEE Act.
Section 9 (6) of the Act provides that, “If requested to do so, the Minister (Patel) may, by notice in the Gazette, permit organs of State or public entities to specify qualification criteria for procurement and other economic activities which exceed those set by the Minister in terms of Subsection (1).”
Any organ of State or public entity may therefore set the 51% qualification criteria for tenders with the permission of Patel, and the ruling has no implications for this process under the BBBEE Act.
Further, Section 10 (2) of the Act states: “The Minister may, after consultation with the relevant organ of State or public entity, exempt an organ of State or public entity from a requirement contained in Subsection (1) or allow a deviation therefrom if particular objectively verifiable facts or circumstances applicable to the organ of State or public entity necessitate an exemption or deviation.”
Similarly, in this case, Patel must publish such exemption or deviation in the Government Gazette, the commission notes.
The ruling by the Supreme Court of Appeal in relation to the PPPFA Regulations of 2017 therefore does not prevent any State entity or department from pursuing and accelerating economic transformation by setting qualification criteria of 51% black ownership under the BBBEE Act.
The commission states that it simply means that the PPPFA regulations cannot be used as a basis to set such qualification criteria.