The new Public Procurement Bill – A granny’s perspective of balancing the old with the new

Being a Granny, I strive to strike a good balance between being ‘cool’, ‘funky’, ‘technologically savvy’, and ‘with it’ BUT at the same time striving to instill those good old and solid practices and values I raised my kids with.

When reading the new Public Procurement Bill, it appears as if, similar to my balancing conundrum as a granny, an attempt is made to develop a piece of law that is ‘cool’, ‘funky’, ‘technologically savvy’, and ‘with it’ BUT at the same time strive to achieve the good Constitutionally entrenched mandates of procuring within a system that is fair, equitable, transparent, competitive, cost-effective and based on a set of ethical values.

Unfortunately, in my humble opinion, the new Bill, as it stands, falls short of striking a good balance and I will substantiate my opinion by discussing two examples, namely the top three concerns from a municipal perspective and the premium to be paid for preferences from an economical perspective.

From a municipal perspective, the following are the TOP THREE concerns identified:

  1. The Bill fails to acknowledge the Constitutionally entrenched principle that local government is an independent sphere of government, by:
    1. Providing that the Nationally established Public Procurement Office and Provincial Treasuries may make and enforce binding instructions on municipalities.
    2. Different than the MFMA, making limited provision for formal consultation with the established representative bodies of local government, being COGHSTA and SALGA.
    3. Opposed to the Constitution, allowing for limited cooperative governance arrangements.
  2. The Bill makes no provision for the Presidentially mandated District Development Model, thereby failing to achieve “a new integrated district-based approach to addressing our service delivery challenges [and] localise[d] procurement and job creation, that promotes and supports local businesses, and that involves communities…”. [own emphasis]. Additionally, the Bill fails to provide for the municipal mandated ‘local and socio-economic development’ as contemplated by sections 151 and 152 of the Constitution.
  3. The Bill indicates that there are a further 36 elements, the content, which is currently unknown, that must still be prescribed through Regulations. The organisational, financial, competency, and related capacity requirements relevant to these unknown elements pose a significant risk of imposing unfunded mandates or hidden costs to our already underfunded and cash-strapped municipalities.

From an economic perspective, the Bill makes extensive provisions for preferential procurement, which is commendable, but fails to prescribe the maximum premium to be paid for such preferences. Since 2000, public sector institutions have been paying an additional preference premium of between 10-20% for goods and services procured, without any significant transformation being observable. In practical terms, it means that the public sector pays up to 20% more than market-related fees for goods and services to achieve BEE.

In a recent Mail and Guardian article (2 March 2024), it was stated that the: “Institute of Race Relations’s (IRR) February report Blueprint for Growth: Slash Waste, Cut Taxes, by Gabriel Crouse, urges the government to cut BEE premiums, estimated to cost about R17 billion per annum.” The article confirms that between 2009 to 2022 preference premiums paid on public procurement contracts amount to an estimated R150 billion. It should be noted that over the same period (2009 to 2022) the official unemployment rate increased from 20, 51% to 32,1%. It is further notable that those mostly affected by unemployment are the same BEE candidates who were to benefit from preferential procurement.

Concluding with my Granny conundrum of striking a good balance and based on the above discussions, we would be remiss if we did not ask ourselves the following two questions when we consider enacting the new Public Procurement Bill:

  • ‘Did we strike a good balance if we ignore the independence and important contribution of a constitutionally established sphere of government, being our municipalities who stand at the coal face of rendering the most basic services to its residents?’
  • ‘Did we strike a good balance if we pay R150bn for preferential procurement, enriching a select few, whilst the unemployment rate increased by 12%?’

Advocate Helen Venter
Managing Director
BRASIKA
hventer@brasika.co.za

Should you wish to read more on this matter, please refer to the paper prepared by Advocate Helen Venter, Professor Geo Quinot and Shaun Scott.

https://mg.co.za/business/2024-03-02-report-urges-state-to-cut-bee-premium-to-reduce-vat/
https://www.macrotrends.net/global-metrics/countries/ZAF/south-africa/unemployment-rate

 

West Coast District Municipality

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