1. INTRODUCTION

1. The Preferential Procurement Policy Framework Act (PPPFA), Act 5 of 2000 and its regulations issued in August 2001, was promulgated to give effect to Section 217 (3) of the Constitution by providing a Framework for the implementation of the procurement policy contemplated in Section 217 (2) of the Constitution. Key elements of the legislation are as follows:

1. A preferential procurement policy must be determined within the framework of the legislation.
2. A preference point system must be used.
3. Specific goals may be promoted.
4. Equity ownership must be promoted
5. Price and equity may be evaluated.

2. COMMENTS

1. The first constraint is that the PPPFA does not clearly instruct public entities to implement the letter of this law as public entities fall under section 1(f) of the Act and no names have been recognised by the Minister in the Government Gazette. A public entity must therefore comply with the spirit of the PPPFA but may have to comply with the letter of the law if it is found that the principles are not promoted at all by an organisation.

 

2. The Framework for Supply Chain Management flowing from the PFMA and which is to be approved soon, determines the underlying support structure that sets the parameters for the execution of procurement within all levels of Government and public entities. This Framework however is applicable to public entities and clearly refers to the implementation of the PPPFA by public entities. These discrepancies in legislative pieces lead to non-compliance with legislation in the short to medium term.
3. The term HDI replaced the old term of PDI but also inherited two added dimensions namely that of women and disabled which are the two other disadvantaged groups. Due to the fact that the term PDI now actually has a definition of people without voting rights prior to the Constitutions, people find it too long to say and therefore the term PDI is just being replaced by the term HDI. This however has the effect that when point scoring is done, departments tend to brand their preference forms incorrectly and forms are then also incorrectly completed which gives a skewed picture of the equity ownership of an organisation.

1. It is recommended that the word PDI be replaced with HDI and that a new group term be found for all three disadvantaged groups.

4. Equity ownership is compulsory in terms of the Act, but the addition of any goals, is a choice left to organisations. Due to lack of knowledge of how to implement, the addition of goals is sorely neglected.
5. It follows from the previous point that capacity building in the implementation of this system is of utmost importance, otherwise the promotion of goals will never realise its full potential.
6. The new Broad Based Black Economic Empowerment Bill which may be promulgated soon, definitely overlaps with the PPPFA in the objectives it wants to achieve. It however does not focus preferential procurement in the same way as the PPPFA. It would be essential that a determination is made of which of the overlapping objectives in which Act should take precedence.

1. The definition of black in the BEE bill promotes only a portion of the HDI promotion in the PPPFA. It must be determined which direction will be promoted for future. Both acts can’t be applied in isolation and each cannot be implemented without overlap in preference allocation. This will have to be sorted out.

7. The PPPFA acts as an incentive in equity ownership as it gives you a pro rata score for each percentage of HDI equity ownership in the organisation. It is incentive to build the equity ownership, as more ownership will gain more points. The BEE bill on the other hand does not currently act as a good incentive to gain more black ownership as it seems that you only gain points once you reach 25,1% black ownership and again at 50,1%. A system is required to act as incentive and not as deterrent.
8. The application of goals in the PPPFA should be more focussed to allow for more direction on promoting goals.
9. There is one inefficient element in the act namely the fact that if the wrong preference system was mentioned in the document, then the tender should be cancelled and retendered noting the correct preference system to be applied. This is not cost-effective and it is recommended that the instruction should be to inform all parties of the new preference system that will be applied pro rata on the same basis as the other system.

3. CONCLUSION

1. More time to comment would however have been appreciated in order to describe the full spectrum of experience gained in the implementation of the Act.
2. The person who takes main responsibility for procurement and who is responsible for the comments, is Ms Riana Bredell who is a senior manager in the Deloitte & Touche Pretoria office and a procurement expert with 18 years procurement experience. Five years of this has been gained while being in the private sector. She is also currently assisting private sector clients and specifically SETA clients which broadens the scope of experience and the exposure to the implementation of the legislation in question.

Please do not hesitate to contact me at 082 578 6338 or (012) 482 0108 should you require any additional information.

Yours faithfully