New Procurement Regulations

Summary
The preferential procurement regulations of 2011 will come into effect on 7 December 2011. The revised regulations align the Preferential Procurement Policy Framework Act (No. 5 of 2000) (PPPFA) and the Broad-Based Black Economic Empowerment (B-BBEE) Act (No. 53 of 2003).

Alignment of PPFA and B-BBEE Act

The revised preferential procurement regulations of 2011 align the PPPFA and B-BBEE Act through:

  • Adopting the B-BBEE Act's definition of a black person
  • Adopting the B-BBEE Act's classification of companies into the following categories:
    • Exempted Micro Enterprises (EMEs) - A micro enterprise with an annual revenue of R5 million or less.
    • Qualifying Small Enterprises (QSEs) - An enterprise with an annual turnover of between R5 million and R35 million.
    • Generic - All companies with an annual turnover of above R35 million.
  • Using the B-BBEE Act's Codes of Good Practice to measure B-BBEE.
  • Using the B-BBEE Act's gazetted sector codes.

Further, the regulations retain the 80/20 and 90/10 preference point systems. However, the 80/20 system will apply to procurement of up to R1 million while the 90/10 system will apply to procurement exceeding R1 million. Moreover, in the 80/20 system, 80 points will go toward price while 20 points will go toward B-BBEE. Similarly, in the 90/10 system, 90 points will go toward price while 10 points will go toward B-BBEE.

B-BBEE Verification

In terms of the revised regulations, as of 7 December 2011 any company which wants to do business with government must obtain a valid B-BBBEE certificate.

In order to be valid, a B-BBEE certificate must have been issued by one of the following types of companies:

  • Verification agencies who are accredited by the South African National Accreditation System (SANAS).
  • Registered auditors approved by the Independent Regulatory Board of Auditors (IRBA) in accordance with approval granted by the Department of Trade and Industry (the dti).

B-BBEE Verification for Exempted Micro Enterprises (EMEs)

EMEs automatically receive Level 4 B-BBEE status irrespective of ownership while EMEs who have more than 50% black ownership receive Level 3 B-BBEE status.

EMEs can submit one of the following documents to claim their B-BBEE status:

There are only 13 accredited verification agencies in the Western Cape so it might be wise for you to apply for your B-BBEE certificate as soon as possible.

Gazetted Sector Codes

The B-BBEE Act makes provision for three types of gazettes:

  • A gazette under Section 12, where the charter is merely a statement of intent by stakeholders.
  • A gazette under Section 9 (5), where the charter is gazetted for 60 days to give members of the public an opportunity to comment.
  • A gazette under Section 9 (1), where the charter is (a) legally binding and enforceable within the sector; and (b) supersedes the Generic Codes.

Sectors gazetted in terms of Section 9 (1) include:

  • Tourism
  • Construction
  • Forestry
  • Integrated transport
  • Chartered accountants

Further, sectors gazetted in terms of Section 9 (5) include:

  • Property
  • Financial services
  • Information and communication technology

Note: Please make sure that your SANAS-accredited verification agency is also accredited to verify companies falling within your sector.

Local content, tertiary institutions and joint ventures

The revised regulations contain requirements for local content, tertiary institutions and joint ventures. You can download a detailed explanation of all the regulations.

Important Contacts:

Western Cape Government
Red Tape Call Centre
Tel: 0861 888 126
E-mail: redtape@pgwc.gov.za

The Department of Trade and Industry (DTI)
Tel: 0861 843 384
E-mail: contactus@thedti.gov.za
Web: www.dti.gov.za

Independent Regulatory Board of Auditors
Tel: 087 940 8800
E-mail: board@irba.co.za

South African National Accreditation Systemn (SANAS)
Irene Kali
Administrator
Tel: 012 394 3769
E-mail: irenek@sanas.co.za

Sources: The DTI, Econobee.co.za, Empowerdex.co.za.

The content on this page was last updated on 15 March 2014