New BEE rules are unconstitutional and bonkers: IRR
The South African Institute of Race Relations argues that the proposed new BEE regulations are unconstitutional, as they will greatly prejudice the disadvantaged who depend on the state for vital goods and services.
Draft Preferential Procurement Regulations of 2016 were published in the Government Gazette on 14th June 2016, under the powers conferred on the Treasury by the Preferential Procurement Policy Framework Act of 2000 (the Act).
Public comment on the proposed regulations was due no later than 15th July 2016, with the IRR arguing that the period was too short to meet the constitutional requirement for proper public consultation.
In an article published on Politicsweb, the IRR argued that section 217 of the constitution states that, “when an organ of state…contracts for goods or services, it must do so in accordance with a system which is fair, equitable, transparent, competitive, and cost-effective”.
As an exception to this general rule, the constitution allows an organ of state to implement a procurement policy that provides for “categories of preference in the award of contracts”, and for “the protection or advancement of persons…disadvantaged by unfair discrimination”. [Section 217 (1) and (2), Constitution]
However, any measure aimed at “protecting” or “advancing” the unfairly disadvantaged must be rationally and reasonably connected to that objective.
“The regulations do not meet these tests,” the IRR sated. “They will, of course, allow a relatively small number of black businesses to gain state tenders at inflated prices and irrespective of how inefficient they might be.”
The institute said that the new rules will greatly prejudice the great majority of disadvantaged South Africans, who depend on the state for vital goods and services.
“Such goods and services should always be provided in the most cost-effective and efficient way, so as to husband scarce public resources and ensure that these are spread as broadly as possible. The proposed new system is so damaging to the truly disadvantaged that it cannot be accepted as a rational or reasonable way of overcoming apartheid injustices.”
Contradictory
The IRR further argues that the new regulations also contradict another core principle underpinning the constitution: the separation of powers.
It said that the constitution vests the capacity to make new law in parliament, not the executive. However, executive law-making inconsistent with the constitution is the hallmark of the regulations, which (among other things):
- Raise the threshold below which the 80:20 formula applies by close on 10 000%, from R1 million to R100 million;
- Introduce mandatory local content requirements in all sectors designated by the Treasury;
- Demand that between 30% and 100% of all contracts above R30 million be sub-contracted to small black-owned firms;
- Introduce similar sub-contracting requirements in a host of other spheres; and
- Allow very many organs of state to set pre-qualification criteria – including a possible 51% BEE ownership requirement – in all the tenders they issue.
The IRR pointed out that the regulations seek to bring about radical changes in the state’s preferential procurement system. At present, all that the Act allows is a 10% or 20% price advantage – for contracts worth more or less than R1 million – for the historically disadvantaged.
“Major changes of the kind envisaged in the regulations cannot be made by ministerial fiat without infringing on the separation of powers. Hence, if the state’s preferential procurement rules are to be changed so comprehensively, this must be done via statute, not subordinate regulation,” the IRR said.
Read the full article here
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