Government clarifies big changes to BEE laws in South Africa

 ·9 Nov 2022

The government remains wholly committed to transformation and empowerment as envisioned in the Constitution, says Finance Minister Enoch Godongwana.

The Minister made the commitment during a press briefing on Tuesday on the new Preferential Procurement Regulations (2022 Regulations) under the Preferential Procurement Policy Framework Act, 2000 (PPPFA), which he gazetted on Friday.

He said the Regulations were aimed at aligning the regulations to the February 2022 Constitutional Court judgement. The judge ruled that the minister exceeded his powers in prescribing the 2017 Regulations.

“Organs of state must comply with the BBBEE Act when developing their procurement policies,” said Godongwana. “Procurement is a complex and highly contested arena in South Africa. Much of it is steeped in legalese and technical language. It is no accident that the Zondo Commission published a dedicated report on public procurement and made significant findings.”

The Minister said the purpose of the 2022 Regulations was to comply with Section 217 of the Constitution on procurement of goods and services by organs of state and comply with the PPPFA of 2000.

While National Treasury was finalising the Public Procurement Bill, which will empower the Minister of Finance to set preferential procurement, the 2022 Regulations repeal the 2017 Regulations and take effect on 16 January 2023, Godongwana said.

“In essence, the 2022 regulations, are a placeholder while we finalise the Bill,” he said.

Among other things, in terms of the 2022 Regulations, an organ of state must, in the tender documents, stipulate the applicable preference point system as envisaged in the regulations; and the specific goals in the invitation to submit the tender for which points may be awarded.

In this instance, said the minister, “the specific goals are as contemplated in section 2(1)(d) of the Act, which may include contracting with persons, or categories of persons, historically disadvantaged by unfair discrimination on the basis of race, gender and disability including the implementation of programmes of the Reconstruction and Development Programme as published in Government Gazette No. 16085 dated 23 November 1994”.

“The above, and other parts of the 2022 Regulations, are in line with the Constitutional Court judgement. Organs of state, must determine their own preferential procurement policies in accordance with section 2 of the PPPFA and the thresholds and formula prescribed in the 2022 Regulations.

“Organs of state are currently applying the 2017 Regulations as per clarification of the Constitutional Court until the 2022 Regulations take effect on 16 January 2023. It should be noted that these Regulations deal with preferential procurement in terms of the PPPFA.”

Godongwana said the new 2022 Regulations require organs of state in the development of their procurement policies to also consider specific the programmes stipulated in the Reconstruction and Development Programme as published in Government Gazette No. 16085 dated 23 November 1994 and provides for points to be awarded for specific goals.

“In addition to maximising value-for-money objectives, a further objective is to regulate preferential procurement anew in the draft Public Procurement Bill (among others repealing the PPPFA) and, as announced during the MTBPS, is to be introduced in Parliament by March 2023,” he said.

A different view

Business group Sakeliga has a different interpretation of the gazetted regulations, hailing the announcement from National Treasury as a victory for sound business practices.

The group, which brought the court action that resulted in the previous procurement rules being removed, went a step further and said that its legal reading of the various Acts in play indicates that state companies and municipalities do not need to follow the national regulations, current or future, at all.

“A proper interpretation of the legislative framework for public procurement indicates that municipalities and other state entities should distinguish between normal value-for-money procurement under section 217(1) of the Constitution and preferential procurement under section 217(2) of the Constitution. State entities are obliged to do the former, but not the latter,” it said.

The group published a report outlining its position in detail.

Sakeliga’s interpretation of the country’s laws implies that state companies and municipalities are protected by the Constitution to have independent discretion regarding procurement and a responsibility to maintain independent procurement policies and processes in service of their communities.

It said that municipalities suffer from widespread service delivery failures, highlighting the public harms of procurement that diverts resources to satisfy B-BBEE and local content requirements – but its interpretation applies to all organs of state and public entities.

The group published a list of over 700 public entities that were granted an exemption – without exception – to preferential procurement laws until the 2022 regulations come into effect, which it said is a testament to how desperate even the government is to avoid its own damaging policies.

With SA News

Read: Big changes for BEE laws in South Africa: report

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