PRESS RELEASE
16 July 2026
EXCLUSIONARY RACE-BASED TENDERING REJECTED
PUBLIC PROCUREMENT REGULATIONS 2026
NEASA SUBMITS COMMENTS
The National Employers’ Association of South Africa (NEASA) has rejected National Treasury’s draft General Public Procurement Regulations and their proposed racially exclusive preferential public procurement regime.
Published on 16 April 2026 for public comment, the draft regulations pose to fundamentally change public procurement in South Africa by introducing a system whereby entities who wish to do business with the state must satisfy new mandatory racial pre-qualification requirements in order to qualify for tenders.
According to the proposed regulations, contracts are now to be categorised by their estimated value, which trigger new distinct mandatory pre-qualification requirements. The categorisation and requisites come in three tiers:
- Firstly, the government must set aside all tenders that are R20 million and below for companies which are exclusively 100% owned by identified categories of persons. These categories of persons include “black people, black women, women, persons with disabilities, military veterans, youth, and small enterprises within a geographical area”. This will effectively disqualify white-male-owned businesses completely. In fact, this arrangement will even bar partial white male ownership in this category.
- Secondly, contracts valued between R20 million and R100 million, will be reserved only for companies that can demonstrate that 40% of their prior procurement spend has been with enterprises that are at least 51% black-owned and managed, or alternatively, that the company commit to subcontracting 30% of work to 100% black-owned firms. Partial ownership will not suffice and firms that do not meet one of these criteria will subsequently be disqualified from bidding.
- Thirdly, for contracts R100 million and above, Government must make subcontracting a mandatory condition of a bid whereby firms must subcontract 25% of work to 100% black-owned companies.
NEASA argues that the draft regulations are ostensibly legally reprehensible due to their exclusionary nature and concludes that the regulations will reduce the supplier base in public procurement, hamper the delivery of services, exclude capable suppliers, unduly reduce competition and market access and inevitably lead to higher procurement costs whilst simultaneously fostering a culture of fronting and eroding business autonomy, merit and economic imperatives.
In its submission, NEASA notes that these draft regulations ultimately aim to further entrench the grip that the ineffectual BEE policy already has on the economy. Effectively, under these regulations, bidders who do not satisfy these pre-qualifying criteria will be automatically excluded from bidding before factors such as capability, functionality or even price are considered.
Such a wholly ‘reform’-oriented procurement regime is economically illogical, and NEASA argues that the only public procurement dispensation that makes logical sense in South Africa, is one which primarily focuses on value-for-money and service delivery.
The proposed preferential procurement regime appears to move beyond constitutionally disciplined redress into a rigid and centralised procurement formulation in which race-based preference risks becoming the first and only pre-qualifying organising principle, rather than one consideration among others.
The automatic exclusion of capable suppliers who do not fall within the categories of persons could disqualify businesses regardless of their ability to deliver value. This is in stark contrast of tendering based on value-for-money.
NEASA also notes that the restriction of the pool of suppliers will inevitably lead to inflated procurement costs as the government will have no means to discover price variance from a wider market, and therefore will have no means to gauge what a reasonable price may be for a tender.
Additionally, the complex nature of these regulations is another point of contention, which, among others, will also make them unworkable in practice. For example, there are very few firms that exist that will be able to comply with the pre-qualification ownership requisite jump from their current black ownership structures to 100% black ownership, as proposed.
The requirement, for example, that a bidder qualifies to tender by demonstrating that at least 40% of its prior procurement spend (which is undefined) was with enterprises that are at least 51% owned and managed by black individuals is also impractical and it is unclear how this will be demonstrated and verified.
Businesses will have to immediately revisit and, where necessary, change or adapt funding models, procurement strategies, ownership structuring, systems and contractual arrangements to remain compliant in order to be able to tender in future.
It is also unclear from the regulations what becomes of entities who currently enjoy access to preferential recognition in procurement in terms of the B-BBEE codes (i.e. EMEs and QSEs) under which companies are assessed on their turnovers, suppliers’ empowerment contributor levels and not solely ownership, as proposed by the regulations, in order to access preferential recognition in procurement.
Will QSE and EME preferential recognition in procurement simply fall away as ownership becomes the only focus for distinction of small enterprises that may enjoy preferential recognition as proposed by the regulations?
The proposition that tenders for contracts of a certain value will be reserved or set aside for only a certain category of people to the exclusion of others, regardless of whether persons who fall outside the requirements are available to bid and can actually do the work, is absurd.
The mandatory subcontracting requirement for businesses to subcontract with only 100% black-owned companies is also rejected. Not only does this arrangement ignore the reality and complexity of business dealings and the delivery of contract demands, it also is extremely exclusionary to indicate that only people from a specific race will qualify to be subcontracted to, especially considering the wide array of businesses and business owners, of all racial backgrounds, that desperately need support in the declining South African economy.
This subcontracting requisite acts as a deliberate constraint on business autonomy for purposes of advancing BEE objectives. Such an arrangement is, for many reasons, ineffectual, as it cuts the thread between big business and small business and erodes corporate autonomy in transformation.
Further to the textual analysis of the proposed regulations, in its submission, NEASA also details the history and legal status of pre-qualification criteria in public procurement in South Africa. Given the fact that the courts have in the past declared pre-qualification criteria in procurement invalid and unconstitutional, NEASA questions the legality of these regulations and argues that they are ostensibly legally impermissible.
Compounding this, is the fact that a judgement on the constitutionality of the very Act upon which the draft procurement regulations are purportedly created, is still pending at the Constitutional Court. NEASA has therefore submitted that the mere publication and creation of these regulations is therefore premature.
NEASA also argues that the Minister may have potentially acted ultra vires in creating and publishing the regulations for comment before the Act or the provision that empowers the Minister to create the regulations became operational. The regulations go far beyond the scope of actions necessary for purposes of bringing the Act into operation as permitted by law.
Government must steer clear of basing tender bids on race-based criteria. Race-based procurement policies have caused tremendous harm to the economy and remain a major contributor towards the downfall of the South African State and its SOEs.
Race-based approaches have further drained hundreds of billions from the fiscus and denied critical, skilled contributors, purely on the basis of the colour of their skin and robbed them of the opportunity to compete in the economy.
NEASA remains steadfastly opposed to the current B-BBEE scheme as a whole, largely due to its evident failures. NEASA stands for a competitive, free-market economy where businesses have autonomy and thrive through innovation, efficiency, and individual merit, and not through state-enforced redistribution and racial policy.
The legislature must prioritise the delivery of services above socio-political imperatives and unachievable compliance metrics. NEASA therefore rejects the proposed regulations, and the preferential procurement model proposed therein and recommends their immediate withdrawal.
To read NEASA’s full submission, click here.
ISSUED BY
NEASA
MEDIA CONTACT
Charis Esema Onaolapo
Media Liaison (NEASA)
083 393 4435
media@neasa.co.za