Government has finally announced the changes to the Preferential Procurement Regulations. The question we need to be asking is to whom exactly are the changes most relevant? Simply put, if a company generates most of its business through government tenders then it is advised that company management look closely into these changes as they impact the bottom-line.
To get a summary context of the changes, below is a comparative table of what WAS (according to the Public Finance Management Act (PFMA) vs what IS since the publishing of the Preferential Procurement Regulations (PPR):
Public Finance Management Act
Preferential Procurement Regulations
The threshold value of procurement subject to 80/20 preference points system was for tenders equal to or above R 30 000 and up to R1 million
The threshold value of procurement subject to the 80/20 preference points system has increased from R 1 million to R 50 million
The threshold value of procurement subject to 90/10 preference points system was for tenders above R 1 million with all applicable taxes included
The threshold value of procurement subject to 90/10 preference points system is for tenders above R 50 million with all applicable taxes included
Regulations do not provide for pre-qualification; however the option to use pre-qualification criteria based on B-BBEE levels of contribution is introduced in the draft regulations
|A tenderer sub-contracting a minimum of 30% of total value of the resulting contract to one or more:
a. black female-owned Exempted Micro Enterprises (EME’s); or
b. black youth-owned EME’s; or
c. black-owned EME’s; or
d. Qualifying Small Business Enterprises (QSE’s); or
e. small businesses, as defined in the National Small Business Act, 1996 (Act No. 102 of 1996)
To note is the substantial increase in the threshold for both preference points systems, that has literally catapulted the procurement capabilities of small black businesses and fundamentally increased their odds in as far as equal and fair opportunity in government tender participation is concerned as well as the ultimate growth of small businesses.
Where there were competing businesses who were previously at an advantage on price, there now exists a need for an urgent turnaround strategy specifically aimed at their transformation objectives.
The Preferential Procurement Regulations have turned the tables of favour towards the government’s promise to develop small businesses and subsequently promote an increase in economic development. It has also nudged captains of industry towards taking their transformation agenda(s) more seriously.
However, underpinning these developments is the glaring responsibility for black owned entities (as defined under the National Small Business Act, 1996) to begin their capacity building endeavours in anticipation of the PPR changes taking effect on the 1st April 2017 and most importantly, the preparation required regarding their responsiveness and readiness to take up the opportunities inherent.
B-BBEE as a tool of transformation demands that all participants are afforded a fair contingency to ‘up their game’ in ensuring a smooth transition of the growth of small businesses in the form of contracts awarded, as well as the responsibility to deliver quality outputs that cannot be at the expense of those tasked with partnering with government, to stimulate economic development as a pillar of the state’s jurisdiction.
For further information, contact:
Thato Malebane, Marketing & Communications Manager
Tel: (+27) 011 259 4018