Big changes for BEE laws in South Africa: report

New legislation promulgated by finance minister Enoch Godongwana has made it unnecessary for fundamental state-owned entities to rely solely on BEE-compliant companies during procurement procedures.

This comes after years of pushback from big business that claimed that the government’s preferential procurement policy hikes the price of products and services, stifling business in the country.

The new legislation seeks to repeal specific regulations within the Preferential Procurement Regulations 2017, originally released five years ago.

During his latest Medium Term Budget Policy Statement Speech, the finance minister said that the National Treasury is driven to modernise procurement in the country with the long-term goal of simplifying and speeding up processes.

The new regulations empower state organs to determine their own preferential procurement policies within the ambit of the Preferential Procurement Policy Framework Act, said Godongwana.

According to the new regulations, the law change is expected to come into effect on 16 January 2023.

As reported by CityPress, the new laws do not reference BEE requirements nor any clause that empowers the minister of trade and industry to force certain sectors to purchase local products.

This in turn, means that state-owned entities such as the national power utility Eskom, Transnet, Sanral and more may be exempt from relying on fully BEE-compliant companies for procuring necessary products.

Prior to 2017, a business’ BEE status could only carry a weight of 10% to 20% in the final evaluation process for a tender, noted the publication.

The then-finance minister Pravin Gordhan made the stipulation that government could determine in advance that only firms that were 100% black-owned might tender for a government contract, the paper said.

The criteria were designed in an attempt to advance certain designated groups, requiring prospective tenderers to meet them.

In February of this year, the Constitutional Court ruled that the 2017 regulations were inconsistent with the Preferential Procurement Policy Framework that clarified mechanisms of procurement as well as categories of the preferential awarding of bids.

The court ordered Enoch Godongwana to, within a year, develop new practices.

According to Godongwana, alongside the new Preferential Procurement Regulations of 2022, the government is also expected to introduce the Public Procurement Bill to Parliament in March of next year.

The bill aims to enhance transparency and integrity and promote the use of technology for efficiency and effectiveness in public procurement, said the minister.

Updated procurement measures for SOEs have been a hot topic for a while, even within the government. Over the course of a few months, a multitude of state-owned entities have sought to be exempted from BEE procurement practices.

Documents in the hands of business rights group Sakeliga, reveal that 760 state entities, including the Treasury, have applied to be granted exemption from the old 2017 regulations since the ruling that deemed them unconstitutional, reported the City Press.

New legislation

Old legislation

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