ARMSCOR South Africa Submission
PREFERENTIAL PROCUREMENT FRAMEWORK ACT 2000


The Armaments Corporation of South Africa Limited is established by Section 2 of the Armaments Development and Production Act and remains to exist under that name despite the repeal of that Act.

The following submission is presented to the committee for consideration. It is also important to note that unless otherwise stated before the committee, there will be no any other submission from this organisation.

Preferential Procurement Regulations, 2001 Pertaining to the Preferential Procurement Policy Framework Act, 2000.
1. Clause 1(h) (2): "Historically Disadvantaged Individual" (HDI) means a South African citizen who is a female.

Comments:
Most companies previous!y owned by non HDI's have now restructured their companies, awarding their relatives, mostly wives a greater shareholding. This defeats all measures to implement the Black Economic Empowerment Strategy initiatives and all other means by Government to address Black Economic Empowerment. The legislation under which they operate covers such structures.

Recommendation:
This clause should be broadened to define all females excluding white females who are not disabled. This will address the creation of structures owned by same shareholders having shifted shareholding to their wives and relatives of the same race.

2. Clause 3 (2): "A maximum of 20 points may be awarded to a tender for being an HDI and/or subcontracting with an HDI and /or achieving any of the specific goals stipulated in regulation 17."

Comments:
The use of the word HDI only creates a barrier for other objectives covered in the BEE Strategy document. The clause also creates a barrier in not taking care of management and transfer of skill to HDI's by the organizations. Passive ownership of business benefiting the same owners of companies is encouraged.

Recommendation:
Black Equity; HDI equity ownership, Affirmative action status of companies tendering should be built into this special goal or to be included in clause 17 of the regulations.

3. Clause 7 "An organ of state must in the tender documents, stipulate the Preference Point System which will be applied in the adjudication of tender"

Comments
More often than not the organ of state is not able to predict the offers that will be received. This results in a number of cancellations of tenders so as to send out new tenders with the correct Preference point system

Recommendation:
Both point systems to be considered for all tenders i.e. the system to be used must be decided by the lowest price of the offerers. This will then solve the application of clause 10 (1) and 10 (2). We acknowledge that refining this clause will not be easy and will require some research and thinking so that the integrity of the tender process remains.

4. Clause 12(1) 'An organ of state may in the adjudication of tenders, give particular consideration to processing locally manufactured products. Preference in this regard may be accommodated within the ambit of Acts 80/10 point system. For specific industries (identified by the Department of Trade and Industry), where the award of tenders and to local manufactures are of critical importance such tenders may be advertised with a specific tendering condition that only locally manufactured products will be considered."

Comments
This clause should be broadened to also include a specific tendering condition that addresses BEE's and HDI's At this moment only locally manufactured products are considered.

Recommendation:
The clause should include HDI's and BEE's as a specific tendering condition. Some of the issues to be considered as specific conditions are transfer of skill to HDI's by an organization, employment equity and value added by that company in promoting Black Empowerment.

Conclusion:
We hope the above issues will be considered by the committee and be Incorporated in any thinking process that the committee will engage on.

Kind Regards

T Demana
BEE/Admin Manager
CEO'S OFFICE