Preferential Procurement and Broad-Based Black Economic Empowerment
Broad-Based Black Economic Empowerment or its acronym BBBEE is a specific government policy to advance economic transformation and increase the economic participation of "black people", including women, people with disabilities, youth, workers and people living in rural areas in the South African economy. This governmental policy was published as an Act in the Government 25899 of 9 January 2004.
In essence companies wishing to do business with government will have to obtain a BEE certificate from a accredited BEE rating agency based on a scorecard for that specific industry. This certificate will determine the number of "empowerment" points, which will be given to bidder when awarding a bid.
Preferential Procurement is derived from the Preferential Procurement Policy Framework Act, Act 5 of 2000 and its Regulations. This Act provides for the implementation of a policy and system where bids (tenders) are not awarded on being to specification and having the lowest price but on a prescribed point system were preference is given to Historical Disadvantaged Individuals (HDI's) South African citizens:
- Who had no voting rights in the national elections prior to the introduction of the 1983 Constitution or the 1994 "Interim Constitution"(i.e. people of colour)
- Who is a female (any race)
- Who has a disability
A person who obtains SA citizenship after the Interim Constitution came into effect is NOT considered an HDI.
It should be noted that: a person can only score points if they are involved in the day-to-day running of the business.
Although the Broad-Based Black Economic Empowerment Act, 2003 was published on 9 January 2004, the Regulations to this Act, which indicates how the requirements of the Act must be implemented and what can or cannot be done, has not been finalised. Subsequently the National Treasury and the Department of Trade and Industry have been collaborating to refine the preferential procurement procedures (PPPFA) and aligning them with the requirements of BBBEE.
In the interim, the National Treasury has issued a circular (18 April 2008) requesting that Departments, Constitutional Institutions and schedule 3A and 3C (of the Public Finance Management Act) Public Entities apply the requirements of the Preferential Procurement Policy Framework Act and its regulations until such time that the alignment is complete and the revised Regulations issued.
The National Treasury, in collaboration with the Department of Trade and Industry, has compiled draft revised preferential Procurement Regulations aligning preferential procurement with the aims of the Broad-Based Black Economic Empowerment Act, and its related strategy.
The Minister of Finance approved the draft Regulations and it was published for comment in Government Gazette 32489 dated 14 August 2009.