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BEE and PROCUREMENT.
BEE
and
PROCUREMENT
by Gerhard Papenfus
Dear employer
A new Treasury regulation for procurement provides for the end of compulsory BEE and local content requirements in state procurement, even though BEE compliance will remain a factor when evaluating tenders.
This follows a Constitutional Court decision in February 2022 (in a case initially brought by Sakeliga in 2017) that the Minister of Finance had no powers to prescribe to entities of the State what their preferential procurement policies should be.
This new Treasury regulation does not apply to municipalities and State-owned Enterprises (SOEs). The latter can still insist on BEE and local content requirements, as long as the tender process complies with section 217(1) of the Constitution which requires that procurement must be executed “in accordance with a system which is fair, equitable, transparent, competitive and cost-effective”.
Although Treasury’s latest amendment (in respect of dealings with the national, provincial or local government) is a positive development, the status quo at municipalities, SOEs and in respect of the private sector (insofar as BEE/procurement is concerned), remains a highly contentious issue and the root cause of ‘no-value’ procurement and corruption. It remains a ‘get-rich-quick’ scheme for far too many role players in power, on all levels of authority and in all spheres of society.
According to Sakeliga, since February this year, more than 700 exemption applications, to be exempted from BEE-procurement, were processed by National Treasury. Among these were applications from the National Treasury itself, both DA and ANC-run municipalities, organs of state and Eskom. This serves to prove that any institution with a bona fide procurement objective will apply for exemption, as ‘best-price for best-product’ should be the main objective in all procurement processes. Race can never be a predominant criterion.
Race-based procurement policies have caused tremendous harm to the economy and remain a major contributor towards the downfall of South Africa’s State and its SOEs. It has drained hundreds of billions from the fiscus. It has denied many critical, skilled contributors, purely on the basis of the colour of their skin, the right to compete in the mainstream economy. Not only these role players, but the entire economy, has suffered as a result. Instead of reducing inequality, unemployment and poverty, it has in fact increased it.
In order for the South African economy to work itself out of its current conundrum, a much more creative solution has to be sought and implemented.
This follows a Constitutional Court decision in February 2022 (in a case initially brought by Sakeliga in 2017) that the Minister of Finance had no powers to prescribe to entities of the State what their preferential procurement policies should be.
This new Treasury regulation does not apply to municipalities and State-owned Enterprises (SOEs). The latter can still insist on BEE and local content requirements, as long as the tender process complies with section 217(1) of the Constitution which requires that procurement must be executed “in accordance with a system which is fair, equitable, transparent, competitive and cost-effective”.
Although Treasury’s latest amendment (in respect of dealings with the national, provincial or local government) is a positive development, the status quo at municipalities, SOEs and in respect of the private sector (insofar as BEE/procurement is concerned), remains a highly contentious issue and the root cause of ‘no-value’ procurement and corruption. It remains a ‘get-rich-quick’ scheme for far too many role players in power, on all levels of authority and in all spheres of society.
According to Sakeliga, since February this year, more than 700 exemption applications, to be exempted from BEE-procurement, were processed by National Treasury. Among these were applications from the National Treasury itself, both DA and ANC-run municipalities, organs of state and Eskom. This serves to prove that any institution with a bona fide procurement objective will apply for exemption, as ‘best-price for best-product’ should be the main objective in all procurement processes. Race can never be a predominant criterion.
Race-based procurement policies have caused tremendous harm to the economy and remain a major contributor towards the downfall of South Africa’s State and its SOEs. It has drained hundreds of billions from the fiscus. It has denied many critical, skilled contributors, purely on the basis of the colour of their skin, the right to compete in the mainstream economy. Not only these role players, but the entire economy, has suffered as a result. Instead of reducing inequality, unemployment and poverty, it has in fact increased it.
In order for the South African economy to work itself out of its current conundrum, a much more creative solution has to be sought and implemented.
Gerhard Papenfus is the Chief Executive of the National Employers’ Association of South Africa (NEASA).
For more information:
NEASA Media Department
media@neasa.co.za
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