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JIMMY MOYAHA: Recently, the National Treasury unveiled proposals for amendments to the General Public Procurement Regulations, available for public comment until earlier this month.
We will take a closer look at these proposals and their possible ramifications.
Read:
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I’m joined by Ann Bernstein, executive director at the Centre for Development and Enterprise, to shed light on these matters. Ann, it’s always a pleasure to have you on the show. Thank you for joining us.
Please provide an overview of the proposed draft regulations and how they compare to the existing Public Procurement Act.
ANN BERNSTEIN: Good evening. Public procurement is of paramount importance. While there’s no official estimate, roughly R500 billion is spent annually by the government and state-owned enterprises.
This is not just a financial issue; it determines how the government acquires essential goods for society. For example, it affects the timely delivery of textbooks at reasonable prices.
It decides whether hospitals have the necessary medical equipment and supplies, and whether municipalities can secure fuel for the vehicles needed to repair water infrastructure.
This is a significant concern and has unfortunately witnessed many failures in our country to date.
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Our purchasing efficiency is lacking; we often face high costs and significant delays that drive up expenses, leading to various challenges.
The Treasury has presented these draft regulations, and while we’re not dismissing them outright, we’ve analyzed them closely.
There are positive elements, such as ‘greater transparency’, which we fully support.
However, we have substantial concerns regarding the provisions for preferential procurement.
We believe these are overly intricate and will drive up procurement costs throughout the system.
Two essential questions arise: First, how understandable are these procurement rules? Can officials in Rustenburg or large state-owned enterprises grasp them? Are they user-friendly?
Understanding ‘simplicity’ is crucial—introducing complexity can lead to uncertain decisions, delays, or the need for multiple approvals.
Each additional layer presents opportunities for delays and corruption.
Hence, we must focus on both simplicity and value for money. It’s vital to derive value from our taxes, especially considering our increasing population and limited resources.
These are the fundamental criteria to evaluate the new draft regulations.
JIMMY MOYAHA: Ann, this is indeed a critical issue we must address. Given the challenges you’ve highlighted, how effectively do these draft policies tackle them? Where might they fall short based on previous procurement failures?
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ANN BERNSTEIN: We are quite concerned about the preferential procurement aspects of these draft regulations. They add complexity, increase opportunities for corruption, and will be costly and difficult to implement.
There are three complex proposals. While I won’t get into the specifics to avoid confusion, we believe the government should urgently reassess the proposed regulations.
They propose set-asides for specific demographics and have modified the B-BBEE criteria, which many have worked toward, such as the requirement for majority black-owned firms.
They now require companies to be 100% black-owned to qualify.
While I could provide detailed insights, broadly, we strongly recommend reconsidering these set-asides as they are inefficient and should be discarded.
We should eliminate the pre-qualification process that limits tender opportunities based on qualifications.
This is a flawed procurement strategy that will reduce competition and likely increase prices.
We also advocate for abolishing the compulsory subcontracting model, which may compel contractors winning tenders above R100 million to seek out potential subcontractors post-feasibility studies. This, we believe, could significantly escalate costs.
In essence, particularly concerning preferential procurement, this approach is misguided. It complicates the process and detracts from the ability to efficiently allocate that R500 billion annually while ensuring value for money.
JIMMY MOYAHA: Increased complexity is the last thing we need. Ann, as we wrap up, I want to discuss how these draft proposals align with Organisation for Economic Co-operation and Development (OECD) standards globally. Do they bring us closer to alignment, or do they steer us away from our objectives?
ANN BERNSTEIN: I’m not well-versed in the OECD standards, so I can’t offer insights on that. We focused on the particulars of these 102-page draft regulations to gauge their intentions and potential advantages for the country.
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The takeaway is that empowering the largest number of black South Africans is best realized through a well-functioning state—not one encumbered by corruption or hampered by convoluted procurement processes that give preference to selected groups.
A crucial lesson from the past 25 years is that if you draft a procurement policy and overlay it with unrelated social mandates…
Such mandates for procurement from women-owned companies, fully black-owned firms, and small businesses—while these are worthy societal goals, they should not dictate procurement frameworks.
This complicates our ability to ensure value for money.
We strongly believe this strategy regarding preferential procurement is flawed.
While there are commendable aspects like improved transparency, this approach does not adequately address how we manage substantial funds that affect millions of South Africans.
JIMMY MOYAHA: The core principle is clear: we need a functional state to better serve its citizens.
We’ll conclude our discussion on that note.
We were joined by Ann Bernstein, executive director of the Centre for Development and Enterprise, to evaluate the latest draft regulations related to public procurement proposed by National Treasury and clarify their intended outcomes.
