Member Article

The South African Government's new Preferential Procurement Regulations, 2022 (“2022 Regulations”) have created uncertainty about how organs of state will identify "specific goals" in their procurement processes. While the regulations do not specifically require the consideration of B-BBEE, organs of state can still use it as a factor in preference point scoring, along with or instead of other goals like employment equity, green procurement, and local content and production. The regulations give organs of state more flexibility in their procurement policies but they must ensure that their allocation of preference points is fair, equitable, and transparent.

In a previousarticle, we discussed the exclusion of specific reference to the broad-based black economic empowerment (“B-BBEE”) contributor status level of tenderers, in the 2022 Regulations. We explained how this does not prevent organs of state from applying B-BBEE as a key consideration in their preference point scoring, but rather allows organs of state to prioritise other “specific goals” in their procurement processes. In this article, we explore what “specific goals” may include.

Explaining “specific goals”

Under the legislation in terms of which the 2022 Regulations were issued, namely the Preferential Procurement Policy Framework Act, 2000, “specific goals” refers to contracting with persons historically disadvantaged by unfair discrimination on the basis of race, gender or disability as well as the long-abandoned Reconstruction and Development Programme (“RDP”) as publishedin theGovernment Gazetteon 23 November 1994

One of the main goals of the first democratic government’s economic policy was the fundamental transformation of South Africa by diverting the country’s resources towards socio-economic programmes aimed at re-dressing the inequalities entrenched by apartheid law. Through the RDP, the government designed an integrated socio-economic framework, which prioritised the development, reconstruction and reconciliation of the new and democratic South Africa.

The five key programmes of the RDP were:

• meeting basic needs which includes:
  • creating infrastructure for job creation;
  • land and agrarian reform;
  • access to housing;
  • water and sanitation;
  • energy;
  • transport;
  • nutrition and health care;
  • environment; and
  • social welfare and security.
• developing human resources: through participatory decision making, recognising the importance of cultural diversity, and creating programmes for cultural diversity for the youth, as well as prioritising the development of the education system.
• building the economy: prioritising the development of the mining, manufacturing and agricultural sectors as well as regional and international trade and co-operation, particularly with regard to manufacturing, security, transport and energy.
• democratising the state and society: the establishment of democratic institutions and practices; as well as increasing the efficiency, productivity and accountability of the public sector.
• implementing the RDP: the establishment of RDP structures in local, provincial and national government, in order to ensure implementation of the RDP programmes.

By 1996, the Growth, Employment and Redistribution (“GEAR”) plan replaced the RDP, which jettisoned many of the RDP’s initial calls for specific programmes and prioritised the introduction of macro-economic policies focused on attracting foreign direct investment, increasing the performance of the manufacturing sector, and the redistribution of wealth. The resurfacing of the RDP 26 years after it was shelved was a result of the predecessor Preferential Procurement Regulations having been set aside by the courts, on the basis that the Minister of Finance’s discretion to regulate preferential procurement is limited.

The 2022 Regulations give organs of state the choice to align their specific goals with B-BBEE or the RDP programmes. This provides a chance for organs of state to prioritise transformation and other developmental priorities. For instance, they may prioritise developmental and transformative priorities such as employment equity, green procurement, and local content and production. We outline these below.

Specific goals relating to employment

The Employment Equity Amendment Act, 2020 (the “Bill”) was recently passed by Parliament and will come into effect on 1 September 2023. The Bill amends the Employment Equity, 1998 (“EEA”), and allows the Minister of Employment and Labour to regulate sector-specific employment equity targets. When the Bill comes into effect, it will empower the minister, by notice in theGovernment Gazette, to set numerical targets for any national economic sector, for the purpose of ensuring equitable representation of suitably qualified persons from designated groups at all occupational levels. As such, organs of state can prioritise employment equity, by setting minimum employment equity targets for prospective tenderers and scoring them for preference points based on how close they are to those targets.

Green procurement

The Climate Change Bill, 2022 was introduced to Parliament by the Department of Forestry, Fisheries and the Environment (“DFFE”) and forms the legal basis for South Africa’s response to the global climate crisis. The Climate Change Bill provides that every organ of state that is affected by climate change or is entrusted with powers and duties aimed at the achievement, promotion and protection of a sustainable environment, must review and, if necessary, revise, amend, coordinate and harmonise their policies, programmes and decisions to ensure that the risks of climate change impacts and any associated vulnerabilities are taken into consideration.

In addition, the relevant minister must, within one year of the coming into operation of the Climate Change Act, publish a list of greenhouse gas emitting sectors and sub-sectors that are subject to sectoral emission targets, which must be aligned with the national greenhouse gas emissions trajectory and include quantitative and qualitative greenhouse gas emission reduction goals. The Climate Change Bill is still under consideration by the National Assembly, but could, once enacted, serve as a catalyst for green procurement.

Local content and production

Regulation 8 of the predecessor Preferential Procurement Regulations provided for the designation of minimum thresholds for local production and content in respect of certain sectors, products or components. When procuring goods and services, under those regulations, organs of state were required, in the case of a designated sector, to advertise the invitation to tender with a specific condition that only locally produced or locally manufactured goods or services meeting the stipulated minimum threshold would be considered. The 2022 Regulations don't require local content and production, but organs of state can still ask tenderers to source and produce goods and services locally for the contract. They can even set aside contracts for people in certain areas to help the local community.

Conclusion

While the 2022 Regulations do not specifically require organs of state to consider B-BBEE in their preference points system, reference to the broader concept of “specific goals” is an opportunity for organs of state to highlight their key transformational priorities in their procurement policies. The obvious concern, however, is the breadth of the RDP and the imperative for measurable goals, to ensure that the allocation of points for “specific goals” is fair, equitable and transparent, as required by the Constitution.

It remains to be seen whether the imminent Public Procurement Bill will provide more clarity on the meaning of specific goals to be applied by organs of state. Until then, organs of state must apply their chosen specific goals in a manner which is clear and ascertainable and does not fall foul of other applicable legislation. Also, potential tenderers must carefully consider tender invitations to ascertain whether they can achieve the identified specific goals for that tender.

Pippa Reyburn

Executive Corporate Commercial

[email protected]

Yana van Leeve

Executive Corporate Commercial

[email protected]

Sibongile Sibeko

Candidate Legal Practitioner Corporate Commercial

[email protected]

 

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