Preferential Procurement Policy Framework Act: hearings

Meeting report

FINANCE SELECT COMMITTEE
10 September 2003
PREFERENTIAL PROCUREMENT POLICY FRAMEWORK ACT: PUBLIC HEARINGS

Chairperson: Ms Q Mahlangu (ANC)

Relevant documents:
Preferential Procurement Policy Framework Act, No 5 of 2000
Business South Africa: Submission
Business South Africa: Powerpoint Presentation
SABC: Submission

Other documents handed out:
Commission on Gender Equality: Submission
Armscor: Submission
South African Petroleum Industry Association: Submission

SUMMARY
Oral submissions on the effectiveness of the Preferential Procurement Policy Framework Act, were made by Business South Africa and the South African Broadcasting Corporation. Written submissions from the Commission on Gender Equality, Armscor and the South African Petroleum Industry Association were also distrbuted. BSA was concerned about the Act placing too much emphasis on equity ownership - at the expense of capacity building and the promotion of local content. BSA said the Act was applied inconsistently and that a compliance office or ombudsman was required. The SABC argued that its business operations would be adversely affected by the constraints the Act placed on the procurement of technology and content.

MINUTES
Business South Africa (BSA)
Mr H Langenhoven sketched the history of the Act, saying it replaced the State Tender Board Act of the period preceding 1994. The Act solely focussed on ownership. Fronting occurred because there was a lack of capacity and skills. This was illustrated by the fact that only 5 to 7% of consulting engineers in South Africa were black. The Act also needed to do more to promote local content. A South African company could have a large international manufacturing partner, for which the local company then simply became an import distributor. This had already led to some local manufacturers going out of business. The Act was applied inconsistently and interpreted in diverse ways. It was difficult to monitor preferential procurement and this lead to slower decision making. Litigation was also constraining the process. A compliance office had been mooted for the Act, but it had never materialised. If someone felt done wrong, he/she could only go to the courts. An ombudsman or regulator would help to overcome inconsistencies. If the State did not have the capacity to monitor, it should become part of the auditing process. The Skills Act and Employment Equity Act needed to be balanced with the Act and Supply Chain Management Framework Guidelines.

Discussion
Mr J Makgato, Chair of Finance: Eastern Cape, commented that BSA's mentioning of an ombudsman and compliance office made it sound like BSA was comfortable with the State Tender Board as it was before 1994.

Mr H Langenhoven replied that he was not trying to defend the State Tender Board. He was just showing the timeline of how the Act developed and how a situation had arisen where it was being implemented by a multitude of agencies and officials.

Ms S Botha (DA) said BSA suggested that an ombudsman should deal with disputes, but what was actually needed was the removal of the causes of disputes. She warned that over-regulation could smother emerging companies.

Ms D Tsotetsi of the Gauteng Legislature's Finance Committee wanted to know what Mr Langenhoven meant when he said the Act was slowing down decision-making.

Mr Langenhoven replied that the time lags between tenders and decisions where getting longer and longer. If a company had to keep resources available for three to four months, it could technically not get other work.

The Chair said she agreed with BSA's suggestion that the application of the Act should be standardised. Procurement documents were very complex and difficult to understand. The National Treasury needed to find ways to simplify the process.

Ms Tsotetsi said BSA is concerned about Government not doing enough to combat fronting, but big business also needed to develop mechanisms to deal with fronting - in the spirit of public/private partnerships.

The Chair wanted to know whether BSA had a code for its members with regards to fronting.

Mr Langenhoven said although BSA could not condone fronting, it had no code of conduct to deal with it. An exact definition of fronting was also problematic. It boiled back down to capacity. Companies would do anything to be part of the system. Fronting did not contribute to development and capacity building.

The Chair said in view of current efforts at moral regeneration, it should be considered to put some mechanisms in place to discourage wrong practices like fronting.

Mr C Kruger, Deputy Director General: Specialist Functions of the National Treasury, agreed and said the right instruments were needed to resolve issues related to Act policies not being properly followed and the phenomenon of fronting.

South African Broadcasting Corporation
Ms J Lawrence, Senior Legal Advisor of the SABC, said the Act constrained the SABC in terms of technology and content procurement. The Act's regulations were applicable to the SABC but not to other broadcasters, because the SABC was a state organ.

Ms S Rapeti, Managing Director: Technology of the SABC, explained that the country's television system was initially based on analogue mechanisms and a drastic switch-over to digital mechanisms only occurred during the last decade. The highly defined and sophisticated digital skills required for this were not yet widely and readily available in South Africa. Local skills still had to be developed in this regard. For the immediate future and on the medium term the SABC had to proceed with current digital solutions, which involved international partnerships. The necessary design and engineering ability was lacking in South Africa, but efforts were being made to create these skills locally. The SABC's technology purchasers consequently found Act policies restrictive.

Ms N Nepgen, General Manager: TV Resources of the SABC, said the broadcaster was concerned about content procurement in terms of the Act, because its tender requirements were too limiting. The SABC gave out briefs for programs and then decided which programs to commission. Act regulations would not work for certain genres, for example television dramas, which were often planned up to three years in advance.

Discussion
The Chair said it was not clear how the Act prohibited the SABC from procuring technology and content. Clause 3 of the Act did provide for the Minister to give exemption under certain conditions. She wanted to know if the SABC considered applying for ministerial exemption.

Mr Makgato said the Act was an intervention to correct imbalances inherited from the past. He realised that the SABC was in an untenable situation in that it had to comply with the Act while other broadcasters did not have to. But the SABC was a public entity and could not be left out of the intervention needed. Apart from business considerations, the SABC also had to pay heed to cultural considerations. There was not enough local content on television. Many of the country's artists died poor. SABC1 was for instance supposed to cater for the Nguni languages, but how much Xhosa and Zulu did one really hear on the channel?

Ms S Sithole, Chair of Finance: Limpopo, commented that the SABC's submission document still referred to the Act as "Act 1 of 1999". The SABC was oblivious to the amendments that were made since. It seemed like the SABC felt it did not have to comply with the country's laws. Instead of providing television that dealt with how the frontiers of poverty could be pushed back, it gave the nation morally degenerative American soap operas.

Ms Tsotetsi said African women were not being empowered by the SABC, because the broadcaster practiced age discrimination. Youthful looks were more important than capability.

Mr T Lamani, General Manager: Public Affairs of the SABC, said the longer tendering process that the Act demanded, put the SABC at a disadvantage against its competition, E-TV and M-Net, who did not have to follow the same procedures. E-TV and M-Net could apply simpler systems to obtain programming.

Mr M Makoela (ANC) wanted to know if the SABC was trying to say it needed exemption from the Act. Was the SABC asking discretion to take decisions to sideline the Act?

Ms Lawrence denied that the SABC's wanted to sideline the Act. She said the key issue was that flexibility was required for her corporation to be able to perform certain elements of its business. The Act was constraining the SABC in this regard.

The Chair said she wanted the SABC to indicate what its procurement policies were in terms of the Act. She added that the Act's exemption clause could provide the SABC with a solution for some of the problems it raised.

She asked the members of the Committee and other Government representatives present to also study and consider the input submitted by the Commission on Gender Equality, Armscor and the South African Petroleum Industry Association.

The meeting was adjourned.