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No change to BEE or localisation procurement objectives, says Godongwana

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Government has no intention of scrapping black economic empowerment (BEE) or localisation criteria in its public procurement policy, and has dismissed recent media reports indicating otherwise.

Finance Minister Enoch Godongwana stated emphatically on Tuesday that government is not deviating from its transformational and reconstruction and development frameworks.

All that has happened is the publication of the new Preferential Procurement Regulations of 2022.

This was in line with a Constitutional Court judgment earlier this year that found the minister lacked the power to make regulations that created a preference mechanism for the entire government procurement system.

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Power lies with organs of state

The court held that in terms of the Preferential Procurement Policy Framework Act the power to create a preference system vested in each organ of state, not in the minister. This pronouncement held that the content of the preference system is invalid. Each organ of state must create their own procurement framework depending on their service delivery requirements.

The new regulations gazetted on 4 November will remain in place until the new Public Procurement Bill, which will go to parliament next year, is enacted to give the minister the power to set the procurement framework.

The saga started in 2018 when Sakeliga (formerly Afribusiness) brought an application before the high court to have the 2017 regulations declared invalid and set aside, on the basis that the minister had acted outside his mandate.

The application was dismissed and went to the Supreme Court of Appeal (which found in favour of Sakeliga) and eventually the Constitutional Court. National Treasury has since drafted new regulations that have now been gazetted.

During a media briefing to clarify government’s procurement policy, Ismail Momoniat, acting director-general of National Treasury, said procurement is highly contested as “everyone” wants to take government to court.

He says there is a danger of “drowning in legalise” where procurement is concerned, as the framework is set out in terms of the Public Finance Management Act, or the Municipal Finance Management Act, or the Preferential Procurement Act.

However, government has by no way changed the policy framework in terms of BEE or its objectives in terms of the Reconstruction and Development Programme.

“The regulations are published in terms of the court order, as the 2017 regulations fall away in January next year.”

Purpose of new regulations

Treasury says in a statement the main purpose of the 2022 regulations is to comply with the Constitution on the procurement of goods and services by organs of state; to comply with the Preferential Procurement Policy Framework Act of 2000; and to comply with the Constitutional Court judgment of February 2022 on the 2017 regulations.

According to Treasury, the 2022 regulations are a “placeholder” while it finalises the bill.

Until then an organ of state must stipulate in its tender documents the applicable preference point system as envisaged in the regulations.

Godongwana says this “may include contracting with persons, or categories of persons, historically disadvantaged by unfair discrimination on the basis of race, gender and disability” including the implementation of programmes of the Reconstruction and Development Programme.

Currently state departments, municipalities and state-owned enterprises are applying the 2017 regulations until the 2022 regulations take effect on 16 January 2023.

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