Irrational new tender policy only serves ANC’s narrow-based re-enrichment scheme
21 July 2015
The proposed amendments to the Preferential Procurement Regulations which govern the tender process to be followed by government are irrational and ought to be scrapped. I will today write to the Minister of Finance, Nhlanhla Nene, requesting him to withdraw the amendments with immediate effect.
The amendments, in terms of section 5 of the Preferential Procurement Policy Framework Act, 2000, seek to further economic transformation by drastically increasing the ‘empowerment’ thresholds by which tender applications are assessed. All procurements less than R10 million will now be assessed on the basis of 50% price and 50% non-price factors. The non-price factors include black ownership, women ownership, and ownership by persons with disability. This is a drastic increase from the current 80% price – 20% non-price assessment rule.
This increase poses a major threat to the procurement process, which is already viewed with scepticism and discontent by the public. The process will now become even more susceptible to abuse and manipulation, serving to benefit a small elite at the expense of the majority of South Africans.
In effect the regulations allow bidders to increase their price by up to 50% more than market value, and still win the tender. This will have a damaging effect on our economy and our national fiscus. By paying more of a premium on tenders, less money will be available for government to spend on service delivery, which negatively impacts poor and disadvantaged South Africans the most.
A small group of already wealthy and well-connected businesses all too often use BEE as a scheme to further enrich themselves. This new proposal exacerbates that problem. It only leads to more public money flowing to a small group of well-connected cronies, and less public money going to the actual delivery of services. We support rational and fair broad-based empowerment, that gives credit for actually growing the economy and creating jobs, and does not just see as its end the creation of a few billionaires at the cost of the public.
Procurement policy should focus on truly involving new entrants in the economy, including giving preferential treatment to those previously disadvantaged South Africans who have not been awarded tenders in the past. This will go far to ensure that Black Economic Empowerment is truly broad-based, in order to benefit the millions of disempowered South Africans who remain outside of the economy.
In this light, it is worrying that government regulations are increasingly being dictated by powerful lobby groups who are close to President Zuma, and who have a massive vested interest in ensuring that empowerment laws benefit them. These lobbies represent precisely that group of well-connected BEE billionaires and multi-millionaires who represent the core problem with current BEE policy - the continuous rotation of empowerment deals and big tenders among the same group of people. The government must not be led by the nose by vested interests.
Empowerment which focuses primarily on the transfer of ownership in businesses has done little to change the economic circumstances of the majority of people disadvantaged by apartheid. The current approach to empowerment has not yet helped to overcome the real obstacles to black advancement in South Africa.
The DA believes that to have an inclusive society, government must focus its policy interventions on expanding economic opportunities and creating jobs through growth. These regulations are in stark contrast to such a goal, and must be scrapped at once.
Statement issued by Geordin Hill-Lewis MP, DA Shadow Minister of Trade and Industry, July 21 2015
