New-look procurement rules: possible transformation game changer
Engineering News – Major reform of the Preferential Procurement Policy Framework Act (PPPFA) regulations, which came into effect last month, has been held up as a key tool in driving radical economic transformation in South Africa by providing greater opportunities for small, medium-sized and microenterprises (SMMEs), particularly those owned by historically disadvantaged South Africans (HDSAs).
In former Finance Minister Pravin Gordhan’s Budget speech in February, he said government would spend about R1.5-trillion in the next three years and that public procurement is “an important strategic vehicle for developing local industries, broadening economic participation and creating work opportunities”.
In the same month, Small Business Development Minister Lindiwe Zulu stated that the new PPPFA regulations could potentially make available R150-billion a year in opportunities for such small businesses and cooperatives. In his first speech as Finance Minister, Malusi Gigaba highlighted the Treasury and government’s commitment to “use State procurement strategically and vigorously, to ensure localisation, promotion of black-owned, women-owned, youth-owned enterprises and SMMEs, and to facilitate industrialisation”.
Gigaba reiterated this view in a recent address to the black business advocacy organisation Black Business Council (BBC), in which he indicated that the National Treasury planned to use the R500-billion yearly procurement budget to transform the economy and give more support to black-owned businesses. The current regulations have dramatically increased the tender threshold to R50-million, meaning that tenders between R30 000 and R50-million will be scored using the 80:20 principle, while tenders above R50-million will be scored on the 90:10 principle. “This is a very significant change and it opens more tenders to be awarded on nonprice factors,” says Werksmans Attorneys director Pieter Steyn.