Updated: Nov 25, 2022
Last week finance minister Enoch Godongwana announced that the Preferential Procurement Regulations of 2017 will be repealed. This is the result of years of pushback from big business claiming that the government’s preferential procurement policy stifles business in the South Africa.
New regulations to come into effect on 16 January 2023, will empower state institutions, including municipalities, to determine their own preferential procurement policies within the ambit of the Preferential Procurement Policy Framework Act (PPPFA). The minister stated that National Treasury is driven to modernise procurement in the country with the long-term goal of simplifying and speeding up processes. The PPPFA do not reference BEE requirements or any clause that empowers the minister of trade and industry to force certain sectors to purchase local products. The new regulation follow after it was decided by the Constitutional Court earlier this year, that existing regulations were unlawful. It sets the scene for a new kind of procurement in South Africa, one where much more discretion will be available to state entities.
Instead of having to apply for to Treasury exemption, they can now choose when and where not to apply preferential procurement. It is likely that there will be much deviation from the political preferences of national government, which will pave the way for a return to value-for-money procurement.
Piet le Roux, CEO of Sakeliga said in a statement that it marks the end of compulsory BEE “…a very harmful arm of the octopus that has now been cut off.” Treasury may no longer mandate prescriptively, that BEE or local content requirements must be taken into account in a tender. A municipality or SOE could still insist on it – as long as the tender process doesn’t fall foul of section 217 (1) of the Constitution which states:
When an organ of state in the national, provincial or local sphere of government, or any other institution identified in national legislation, contracts for goods or services, it must do so in accordance with a system which is fair, equitable, transparent, competitive and cost-effective.
Piet le Roux went on to say about the new regulations: “It’s an important achievement. Most strikingly, it shows that business can push back against harmful ideology and harmful policy. And it’s something that business people are often accused of, not standing up, not pushing back. But here we have coordinated action by business people who supported Sakeliga financially for several years so that we could achieve this.
“I think that’s a great feather in the cap for businesses in South Africa. I thank all our members and everybody who supported that contribution. What this shows is that coordinated business action can lead to a change either in government policy, or at some point, government loses its ability to enforce harmful policies.”
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