Government admits B-BBEE procurement is prone to corruption

14 November 2022

Note to editors: Please find attached soundbite by Dr. Dion George MP.

Confusion over government’s incoherent messaging on Broad-based Black Economic Empowerment (B-BBEE) procurement reached a crescendo last week when the Minister of Finance, Enoch Godongwana, issued regulations that were silent on B-BBEE and these were interpreted as effectively doing away with the B-BBEE consideration when a state department awards a contract. This despite the President’s response to questions in Parliament that B-BBEE is a constitutional imperative and is here to stay. The Minister subsequently clarified the confusion by referring to a new Preferential Procurement Bill that will be introduced in 2023.

Government responses to PAIA applications by Sakeliga, have, however, clearly highlighted the fact that the B-BBEE procurement model is unworkable and detrimental to South Africa’s economic growth.

Documents, wherein state entities sought permission from various Ministers of Finance, including Nhlanhla Nene, Tito Mboweni and Enoch Godongwana, to be exempted from B-BBEE requirements as set out in the Preferential Procurement Framework Act, confirmed that the failed B-BBEE model is prone to manipulation and corruption, annulling government interventions and potentially posing a risk to national security.

The documents include:

A request from Minister of Mineral Resources and Energy, Gwede Mantashe to which then Minister of Finance, Tito Mboweni replied: “the motivation speaks to a 49%/51% consortium where 49% is comprised of South African bidders and 51% is comprised of international companies. This is prone to manipulation and corruption because it forces an international company to find a South African partner even if the partner may not really meet the requirements”.

A request from Minister Ebrahim Patel’s Department of Trade and Industry that admits: “the unintended consequence of a blanket implementation of the PPPFA works against the positive impact IDC contributes in the real economy …”.

A reply to Minister in the Presidency, Mondli Gungubele, from current Minister of Finance Enoch Godongwana, that “the SSA (State Security Agency) had failed to demonstrate how the provisions of the PPFA pose a risk to national security which is the basis of the application.”

Minister Godongwana says that “it must be noted that procurement must happen with a system which balances the constitutional imperatives in order to ensure the government’s objectives are considered when institutions contract for goods and services''.

Government needs to be reminded that our Constitution also states that when an organ of state contracts for goods and services, it must do so in accordance with a system which is fair, equitable, transparent, competitive and cost-effective. The failed B-BBEE model does not “protect or advance persons disadvantaged by unfair discrimination”, as provided for in our Constitution, it makes a few politically connected cronies rich at the expense of the poorest South Africans battling daily to put enough food in their tables.

The DA will propose an alternative to the Preferential Procurement Bill when it is tabled next year.

Issued by Dion George, DA Shadow Minister of Finance, 14 November 2022