Public Procurement Bill: National Treasury response to public submissions; Procurement & B-BBEE Statistics briefing

Meeting report

The Chairperson welcomed all those present and apologised for arriving at the meeting two minutes late. He outlined that the Committee would continue deliberating on the department’s responses to the submissions made on the PP Bill. Thereafter, it would receive a briefing from the DTIC on the B-BBEE statistics at 15:30.

He asked if the NT had any announcements to make.

Adv Empie Van Schoor (Chief Director: Legislation, NT) mentioned that the department submitted a document on Chapter 4 of the Bill to the Committee. In addition, she said that Mr Willie Mathebula would arrive 5 minutes late to the meeting.

The Chairperson informed Members that the Southern African Clothing and Textile Workers Union (SACTWU) was quite displeased that the two-pot pension retirement system will only be implemented in September of this year.

Afterwards, he referred Members to page 22 of the presentation document.

Briefing on the NT’s responses to the submissions made on the PP Bill

Adv Van Schoor said she would take Members through Business Unity of South Africa (BUSA)’s comments.

BUSA questioned whether the government was getting value for money in its public spending. In response, the department highlighted that cost-effectiveness was provided for in the Objects Clause, with reference to Section 195 of the Constitution. The Objects Clause contains additional wording that, among other things, touches on assessing cost benefits and risks.

The Chairperson was concerned about BUSA’s claim that the Bill deconstructed the B-BBEE Act and asked that the department move to that point and provide members with more clarity.

Adv Van Schoor asked if she could move through each comment sequentially.

The Chairperson accepted her request.

He asked if BUSA’s claim that there was evidence showing that of the public comments received following the August 2023 invitation by the Standing Committee on Finance, only 36% were considered, with 64% not having been processed, was true and that this would likely be challenged in the courts based on legal precedent.

Adv Frank Jenkins (Senior Parliamentary Legal Advisor) said the question was whether the Committee received a briefing if it knew about the submissions and whether it considered them. The test for public participation looks at whether persons had a meaningful opportunity to impact the process. In his opinion, the Standing Committee allowed the public to make written and oral submissions before it, and responses were provided. Furthermore, he felt that the department did look at all the submissions.

It was correct that Parliament would be wrong if the National Assembly (NA) did not examine the submissions. Also, the National Council of Provinces (NCOP) was required to examine what was submitted to it and what work provinces had done in processing a bill.

He indicated that Parliament followed all of the correct procedures. While he admitted that Parliament could consider urgency and time, they could not override the constitutional obligation to involve the public.

The Chairperson asked if the PLA knew about the case where the Constitutional Court (CC) invalidated the Traditional and Khoi-San Leadership Act.

Adv Jenkins confirmed that he was, and highlighted that it was also referred to as the Mogale matter. In the Doctors For Life matter, the court said Parliament must enable and give the public a meaningful opportunity to participate in the consultations around legislation.

Due to funding from the European Union (EU), Parliament has created a sector public participation model that acts as a guideline for the whole sector. Certain issues are put to provincial legislatures and Parliament. One requirement is that there must be pre-public hearing empowerment workshops for the public to understand the legislation being considered.

In the Mogale Judgement, the CC said this requirement was unmet. Given this, he advised that the Committee view this in a broader light and ask whether people understand the legislation before them and the purpose of the public participation process.

The Chairperson pointed out that those who made submissions on the Bill were experts so they did not require workshops.

Adv Jenkins agreed with the Chairperson’s view.

The Chairperson indicated there was no reason for the department to respond to BUSA’s concern regarding Parliament. Even though the organisation had endless opportunities to participate in the process, he added that it would be provided another chance once the Committee had sent them the Bill.

Mr D Ryder (DA, Gauteng) agreed with the advice given by the PLA and noted that the level of participation in the Bill has been better than most. Stakeholders were given an opportunity to engage with the Committee and the department extensively. In addition, he pointed out that the broad majority of whom the Bill affects did not have access to the gazettes on a weekly basis and probably did not have the expertise as the interest groups that actively engaged in the process.

Considering this, he argued that the level of participation in the bill was not deep enough. This was illustrated during the recent discussions around the Division of Revenue Bill, where the Gauteng provincial legislature could not get a single person to make a comment during the public participation process. He urged the parliamentary staff and Committee to do more to attract comments from people impacted by the Bills, like small businesses and contractors, rather than only large organisations and organised businesses.

The Chairperson agreed with Mr Ryder’s comments. He informed the Committee that previously, Parliament received funds for non-governmental organisations and marginalised people to fly to Cape Town and spend one or two nights there. However, that fell away after the then Speaker said there were insufficient funds to continue doing so. Also, during the previous parliamentary term, the Standing Committee received money to transport pensioners from Maritzburg to Cape Town.

Adv Van Schoor, on BUSA’s concern that B-BBEE overlapped with the sector codes, said the department proposed a new clause that would replace the use of certificates: a bidder having a prescribed minimum percentage of preferential procurement from enterprises owned or managed by black people in terms of the applicable code of good practice on black economic empowerment, issued in terms of Section 9 of the B-BBEE Act. The department believed this addressed BUSA’s concern that the Bill undermined the B-BBEE Act.

Mr Ryder asked if this change meant that there would still be different tiers of B-BBEE status levels.

Mr Willie Mathebula (Chief Procurement Officer at the NT) indicated that the levels would remain as they form part of the B-BBEE Act.

Adv Van Schoor said BUSA felt the urgency to implement the Bill was linked to the department trying to close a gap created by the CC’s invalidation of the 2017 Procurement Regulations. In response, the department pointed out that the gap was closed when it issued the 2022 Procurement Regulations, with the difference being that these matters are largely done through procurement policy institutions. Except for the framework in the Preferential Procurement Policy Framework Act (PPPFA), there was not much else to determine, so it was left to procuring institutions to implement preferential procurement.

The Chairperson asked the department to respond to BUSA’s questions on whether cost-effectiveness was synonymous with value for money, when competitiveness was deemed acceptable, and when it was not.

Mr Mathebula explained that BUSA meant that procuring institutions should look at what value would be derived despite the price.

The Chairperson said he had understood the question. What he was asking was what had been implied by BUSA through the question. To him, this seemed more like a philosophical question.

Mr Ryder agreed that it was a philosophical question, as competition presupposed a number of different inputs. The aim of this legislation was to address historical injustices that have led to unequal playing fields. He felt this debate was for individual political parties, not the Committee.

Adv Van Schoor then took Members through the comments of the Congress of South African Unions (COSATU) and SACTWU. Both unions requested that the department include a default position for open competition according to a points system that includes price, preference, quality, and functionality. Noting this, the department proposed including a provision in Clause 16 that would recommend a layered application of Clauses 17, 18, and 19. If none are applicable, then the normal open competition provisions will apply.

Linked to that is the proposed provision in Clause 25 (1)(d), which would apply to all procurement, including evaluations of cost-effectiveness and functionality.

The unions also raised concerns about certain procedural issues in Clause 17, which the department proposed should be removed. In addition, they proposed that the Bill require procuring institutions to conduct market research and policy analysis. However, the department highlighted that this was provided for in Clause 18 and the regulations requiring the procuring institution to state the need and intended operation.

They also expressed concern about the excessive layering of Clauses 17, 18 and 19. The department responded that local content is applied across the board, so if there is a designation for a particular product, it must be applied, whether preferential or normal procurement. Furthermore, the department will propose a provision that states local content designation applies across the board.

Mr Ryder considered whether Clause 25 interfered with Clauses 18 (1)(c)(v) and 23. He believed local content requirements had to be defined in terms of the geographical area where procurement would be taking place, in line with Clause 23, but this was limited by Clause 18 (3). He was bothered by Clause 18 (3).

Adv Van Schoor explained that local content and locality were two separate matters. Clause 20 dealt with local content, which would be linked to the country, not a province, district, or local municipality. She further indicated that the department planned to submit its work on expanding the provisions relating to geographical location to the Committee on Tuesday.

Mr Mathebula added that the power given in Clause referred to the designation of local content, which was broader and had nothing to do with locality.

The Chairperson asked if the department had considered defining local content and locality in the Bill.

Adv Van Schoor said that the department would consider doing so. The only definition it could provide is that local content referred to what is contained in Clause 20.

Mr Ryder suggested that the Bill could reference the provision which touches on the powers given to the Minister of the DTIC to determine local content.

Adv Van Schoor remarked that the department had supported specific proposed amendments by the two unions, such as adding a prescribed minimum of potential qualifications to Clause 18 and omitting Clause 25.

She told Members that COSATU had proposed a national register of excluded persons, their families and known close associates that contract with the state. In its response, the department said that creating and maintaining such a register would be too complex and not feasible. Moreover, Clause 13 already contained a prohibition that automatically excluded persons who may not contract with the state.

The department proposed a new provision in Clause 33 (2), which states that if a bid is above a prescribed value, the Minister must make regulations about disclosing details when a bid is evaluated to a family member or known close associate of the automatically excluded person.

The Chairperson supported the department’s proposal as he believed the register would be impossible to implement.

Adv Van Schoor indicated that COSATU also requested that the Bill be brought back to Parliament for consultation once it has been enacted for 18 months.

The Chairperson noted this. He asked to be reminded if the Committee and department had agreed that the definition of ‘confidentiality’ should not block legitimate access to information.

Adv Van Schoor confirmed that they had.

She then took Members through Dr Ncedo Mkondweni’s submission. While he supported the Bill, he believed the proposal is that the preferential points weighting must be greater than the weighting for price and quality or functionality combined. During the discussions, he proposed that the department remove the reference to functionality in Clause 17 (5), which the department agreed to.

Dr Mkondweni also requested that the department prescribe contracting methods, which it previously proposed, including in Clause 64 for different procurement categories.

Dr Mkondweni pointed out that there is a problem with service providers and procuring institutions utilising so-called standard contracts which do not comply with legislation. If that were the case, such contracts would be legally invalid. However, he proposed that it would do no harm to include a clause in the Bill which states that if a contract is concluded by a procuring institution and a successful bidder that is contrary to a provision of this Act, that provision of the contract would be null and void, which the department agreed to.

The Chairperson asked if such a provision was already in the Bill or if the department proposed including it.

Adv Van Schoor clarified that the department had proposed that it be included.

The Chairperson noted that certain people or organisations felt the PP Bill was less progressive than the B-BBEE Act. In contrast, the department argued that the Bill was necessary as the B-BBEE Act was inadequate.

Mr Mathebula confirmed that this observation was correct.

The Chairperson asked if the majority of those who advocated for BEE felt that the Bill had made some progress in advancing the policy, but it did not go far enough.

Mr Mathebula acknowledged that advocates of BEE, such as the BBC, perceived that the Bill did not go far enough in advancing the policy. He said it was important to note that BEE was not only measured through procurement, as the Act was broader and spoke to sector codes, et cetera. The question was how to ensure the BEE Act found some level of expression in the Bill and did not regress the gains made thus far.

The Chairperson indicated that a delegation of black businessmen from KwaZulu-Natal complained about the Bill. Given the concerns around the Bill, he thought there might be a need to reach out to black businessmen after it was passed to point out that this was only the first phase of its application and that phase two would look deeply into other matters. However, he stressed that the Committee could not accept the BBC’s proposal to exclude different categories of people, including those with disabilities, from benefiting from public procurement due to their skin colour.

Mr Ryder mentioned that the Committee discussed the BBC’s proposal to remove other designated persons from the Bill, whereas other institutions and the Democratic Alliance have argued that race is no longer a proxy for poverty or the previously disadvantaged. He felt that various interest groups have narrow preferences on this matter.

Despite not agreeing with the Bill, he did not understand the perception that the Bill would regress the gains made by B-BBEE.

Ms D Mahlangu (ANC, Mpumalanga) said that the Committee had asked the department to provide a breakdown of the B-BBEE statistics. Even though all members of the public could make submissions on the Bill, the Committee did not have to agree with each proposal. The ANC, she continued, was clear on its position regarding B-BBEE.

She was pleased that the department also rejected the BBC’s proposal.

The Chairperson still felt that the department, accompanied by the Minister, should meet with the BBC to manage perceptions. Workers also expressed dissatisfaction with the Bill, and trade union members questioned whether their leaders had consulted them on it.

Adv Van Schoor then took Members through the submission of the Construction Sector Charter Council (CSCC). She said the organisation’s main concern was that the trumping clause in the Bill would lead to the demise of the B-BBEE Act, especially Section 10 (1)(b) of the same act, which said that every organ of state must apply any relevant code of good practice issued under that Act in developing and implementing preferential procurement policy. As such, they proposed that the trumping clause be removed.

In its response, the department explained that the trumping clause was important as this Bill would be responsible for regulating public procurement, and removing it for this purpose may give rise to a conflict with other legislation. Furthermore, she mentioned that the B-BBEE Act and its sector codes were not only given effect through public procurement.

With this in mind, the department proposed that Clause 18 (1)(a) be amended.

The Chairperson noted the department’s response.

Adv Van Schoor proceeded to take Members through the Institute of Race Relations (IRR)’s submission. One of the issues raised by the IRR was that the department failed to address how BEE premiums are to be counted in the bill. The department responded by pointing out that the aim of Chapter 4 was to address fundamental constitutional provisions and that there was provision for conditions, thresholds, and parameters to ensure that preference measures were implemented responsibly. Moreover, the department felt that there was provision for negotiations to ensure that procuring institutions did not pay exorbitant contract prices.

The IRR also discussed the rejection of the maximum value-for-money option in any tender process and the two elements that must be considered, such as the cost the procuring institution would have paid absent the preference and the price of the winning contract and how the department would deal with that. In its response, the department said this would be managed through the regulations.

The Chairperson asked if all the regulations were subject to parliamentary scrutiny.

Adv Van Schoor confirmed that was correct.

The Chairperson stated that nothing stopped Parliament from holding public hearings on regulations.

Adv Van Schoor also confirmed that was correct.

She said that the IRR questioned whether paying premiums was pro-poor. The department believed Section 217 (2) provided for preference and that paying more for market price to achieve this was justified.

Another concern the IRR raised was the department’s alleged promotion of uneconomical discretionary power to the Minister. The NT’s position was that if it is uneconomical, it should not be made mandatory for the Minister to refuse except when it is justified. For instance, to protect the manufacturing base of South Africa against foreign imports. However, in the case of instructions, which mainly deal with the administrative matters related to implementing the Act, if it is uneconomical, then the Public Procurement Office (PPO) should grant such a departure from the instruction.

The IRR also asked how race would be tested. In response, the department explained that the definition in Clause 1 was the same as the one used in the B-BBEE Act. If any individual misrepresented themselves, claiming to be black when they are not, this would be seen as fraudulent.

The Chairperson did not understand why the IRR thought that the department increased incentives for individuals to identify as black to receive premiums without explaining how disputes around racial classification are to be adjudicated. He wondered how someone could present themselves as black if they were white.

Adv Van Schoor thought this comment related to the alleged new movement of people not identifying as any gender.

The Chairperson indicated that during Apartheid, some individuals were able to re-classify themselves from black African to so-called Coloured or be re-classified by the then government.

While he acknowledged the well-written submission by the IRR, he noted a fundamental philosophical and policy difference between it and the ANC.

Adv Van Schoor added that the IRR sought for the department to have a tendering process open to everyone, and race to be used as a tiebreaker if required.

Thereafter, she took Members through the MK Liberation War Veterans (MKLWV) submission. It requested the inclusion of military veterans in Clause 17 and not only Clause 18. As such, the department proposed including them in Clause 17 (3) as a standalone category and under the list of small enterprises. In addition, it also proposed that the definition of military veterans be narrower to state: any South African citizen who rendered military service to any non-statutory military organisations involved in the South African liberation war from 1960 to 1994.

The department took paragraph A, removed the word statutory, and removed paragraphs B and C from the clause.

The Chairperson asked if the organisation was in agreement with the change.

Adv Van Schoor said it was difficult to say. During the consultations, a representative from the organisation said the clause would be acceptable if it were limited to non-statutory forces.

The Chairperson advised the department to take the position that is most consistent with the government's existing legislation and policy. Parliament would send the Bill’s text to the organisation to investigate the proposed change.

Mr Ryder asked why military veterans were included as a separate group, as the proposed definition did not include anyone who had served since 1994. He wondered whether the intention to include military veterans was to reward individuals who had fought for Umkhonto We Sizwe (MK) or the Azanian People’s Liberation Army (APLA). In addition, he asked if the provision would be expanded to include all people who had served their country before and subsequent to 1994.

Military veterans across the world are handled uniquely as they have given service to their country, he said. Nevertheless, he was pleased that the definition proposed was obtained from the Military Veterans Act (MVA) because if the Committee re-defined what military veterans were, they would be treading on dangerous grounds.

Mr F Du Toit (FF+, North West) wondered why the department sought to include military veterans in the Bill as provision has been made for them in the B-BBEE Act. He felt that this was a duplication and that the proposal was only made to gain favour from military veterans.

Ms Mahlangu agreed with Mr Ryder’s comment that the Committee should not create its own definition for military veterans when it is already provided for in the MVA. This would be outside its mandate.

The Chairperson said the department could not equate MK guerillas with those who served the state before 1994. The government has already decided to implement policies that would benefit those who were involved with the MK and APLA. For him, there was a fundamental and political difference between fighting for one's country through the MK and fighting for an oppressive minority regime. As far as he was concerned, the legislation should benefit the guerillas of the MK and any other liberation movement that opposed the Apartheid regime. 

Despite that, he acknowledged that many of the former soldiers who served the Apartheid regime had been included in the South African Defence Force. Those and individuals who joined the defence force post-1994 soldiers were entitled to the benefits envisaged in this proposed clause.

Adv Van Schoor clarified that the department was proposing a specific definition for the purposes of this Act, which is limited to people who fought in the non-statutory forces. The reason for this was their concern that this group of individuals were disadvantaged.

The Chairperson said the Members should agree to disagree on the matter, as the majority party would not change its stance given the contribution made by liberation movements to bring about democracy in the country.

Mr W Aucamp (DA, Northern Cape) stated that it is often said that wars are places where young people die due to the decisions of their elders. Many military veterans between 1961 and 1994 did not have a choice; they had to serve. Those individuals were specifically included in the definition found in the MVA to further the nation-building project and prevent differential treatment between them and guerillas. As such, he felt that it would be unfair to exclude them.

The Chairperson agreed with Mr Aucamp’s statements and stressed his commitment to nation-building. Even though he recognised that many white men died during the Angolan War, he believed that they had a choice to either defect to the ranks of liberation movements or leave the country. Nonetheless, he thought those matters were irrelevant to the Bill as there was already existing ANC and government policy to provide housing and special pensions to non-statutory military veterans.

This position was a non-negotiable position for the ANC.

Mr Du Toit took issue with the fact that the Chairperson had painted the so-called military veterans as heroes when they had bombed and killed innocent civilians in the country.

Ms Mahlangu requested that members desist from raising sensitive political debates in the meeting, as it distracted them from the business of the day. She advised the FF+ to submit a motion in the House for debate if it wanted to pursue the matter further.

The Chairperson indicated that the number of civilians killed in the Pretoria Church Street Bombing and Durban beach-front bombing did not even amount to 2% of the civilians killed by the South African Defence Force within the country. It had not been the policy of the ANC to kill innocent civilians, he added.

Nevertheless, he echoed Ms Mahlangu’s sentiments that the Committee focuses on the matters at hand. He advised the department to retain its proposal.

Mr Aucamp stressed that the struggle was concluded through a negotiated settlement between the two opposing sides. Everyone in the country had chosen the road to peace. In those discussions, the definition of the word military veterans in the MVA was produced. He called for the Committee to not change that definition.

The Chairperson mentioned that the Committee would not be changing the definition.

Mr Aucamp clarified that he meant that the application of the definition should not be changed.

The Chairperson explained that policies and legislation prioritised non-statutory veterans. One policy related to housing provision by the Department of Human Settlements. Meanwhile, the Special Pension Act has only been made available to non-statutory veterans. It was indispensable to reconciliation and nation-building to give those who were non-statutory benefits.

He proposed that the DA and FF+ request a special NCOP or Department of Military Veterans debate on this matter, as it was irrelevant to the matters at hand and was evoking strong emotions from Members. He then closed the matter.

Adv Van Schoor said the MKLWV raised concerns around Clause 18 and that it may lead to veterans' exclusion, but now, with the inclusion in Clause 17, the department believed this would not be the case.

Another proposal it made was that certain industries, particularly the defence and security industries, be earmarked for empowerment by military veterans. The department believed that having such specific earmarking for one category for specific sectors was not viable.

The Chairperson said the Committee could not agree with MKLWV’s proposal.

Adv Van Schoor said the MKLWV proposed that Clause 38 include South Africans who specialise in developing emerging businesses on a tribunal. As the tribunal was to hear disputes, the department believed the minimum requirement had to be individuals with experience in law or procurement. The Minister can appoint additional individuals to the tribunal if other expertise is required.

The Chairperson asked if the DTIC was present in the meeting.

Mr Mathebula confirmed that it was.

The Chairperson stated that the DTIC would take Members through the statistics on the progress of B-BBEE.

He indicated that the IRR had sent a letter to the Committee stating that the department was misleading Members. He stressed that the committee would determine this.

Procurement Spend Statistics briefing 

Mr Tumelo Ntlaba (Acting Chief Director: SCM IT, Office of the Chief Procurement Officer), Mr Jacob Maputha (Senior Manager at the DTIC) and Mr Stephen Hanival (Chief Economist: Research at the DTIC) took the Committee through the presentation.

Mr Ntlaba stated that the initial transformation policies post-1994 focused on enabling black South Africans to obtain a non-controlling stake or equity in existing enterprises. However, they did not address the need to focus on new enterprise development or promote businesses controlled by black South Africans. Noting this, the Cabinet approved the Black Industrialists Policy (BIP) in 2015, which seeks to increase black South Africans' participation in ownership and control of productive enterprises in key sectors and value chains of the economy.

Despite the progress made by BEE and BIP, significant barriers to entry for black people to participate fully in the economy remained. Black businesses still faced higher barriers to entry arising from their continued exclusion from established business networks and value chains. Other reasons include poor access to inputs and markets and lower skill levels.

Mr Maputha pointed out that recently, the private sector has begun to publish regular analyses of progress on BEE, such as the Sanlam Transformation Gauge. In addition, the DTIC contracted Blueprint Consulting to undertake an independent evaluation of BEE and BI programmes. All the statistics contained in the report drew from this research.

Key findings

• The B-BBEE entity impact from 2009 to 2021 to total gross domestic product (GDP) amounts to R350.15 billion;
• Over this period a total of 949,680 jobs have been created
• Overall black ownership increased from 27% in 2017 to 39.5% in 2021;
• Overall black women ownership from 9% to 12.4%;
• The average of black-owned entities on the Johannesburg Stock Exchange (JSE) increased from 29% to 39%
• Whereas no 100% black-owned entities featured on the JSE
• Some overachievements were recorded for the measure of the sector targets for the percentage of large entities target ownership by sector; most notable were;
• 46% target achieved against a sector target of 25% in finance;
• 50% target achieved against a sector target of 32.5% in construction
• However, this was not achieved for Agri BEE, which has obtained 20% against a target of 25% in Agri BEE and 20% against a sector target of 27% for property

 

Mr Hanival informed the Committee that while early BEE deals created a class of asset-rich black South Africans, the current realities suggest that share ownership as a means of building wealth for black South Africans outside of workers' schemes and similar is not an approach used by cash-poor South Africans.

He further said that the data on the B-BBEE Codes suggested that there may be a reason for realigning prioritisation towards management control and enterprise development.

Discussion

The Chairperson thanked the DTIC and NT for the informative presentation.

Afterwards, he asked if the department had seen the IRR’s letter, which said the figures presented were false. He asked if the department had any response.

Mr Mathebula mentioned that one of the elements on the B-BBEE balanced scorecard was ownership. It was possible to have a BEE-level status 1 without necessarily considering ownership. This also meant that a black-owned company might not receive a BEE-level status 1. He added that when reporting the figures, it is often assumed that a company with a BEE-level status 1 is a black-owned company because of the broad-based nature of the policy.

The Chairperson asked where the IRR obtained the figure that black-owned companies had been paid trillions for government procurement.

Mr Mathebula said that the figure was incorrect.

The Chairperson noted the department’s response. Thereafter, he asked for the Committee Content Advisor to present the independent B-BBEE statistics.

Independent B-BBEE statistics briefing

The Committee Content Advisor took the Committee through the presentation.

She told Members that the Chairperson of the Committee requested that the content and research support team provide independent statistics on the beneficiaries of BEE and procurement data.

Key findings

• According to the Sanlam Transformation Gauge, the B-BBEE scorecard elements for listed and unlisted companies for 2023 were not met apart from the socioeconomic development one
• Concerning the black ownership element, 81% of the target was met in 2023;
• 69% was met for management control;
• 85% for skills development and;
• 76% for enterprise and supplier development (ESD)
• Regarding the black ownership element, integrated transport (61%) and property (65%) were the worst-performing sectors in terms of meeting their targets in 2023

 

After the presentation, the Chairperson opened the floor for discussion.

Discussion

Ms Mahlangu appreciated the two presentations as she felt they were progressive.

The Chairperson asked a series of questions. First, he asked if one could be classified as level 1 without being 100% black-owned and whether there has been a consideration on how the points are allocated to incentivise the industry to open spaces up for black ownership and also emerging black companies to grow and be profitable apart from state procurement.

He noted that enterprise and development allocated 40 points.

Second, he asked why Sanlam conducted a transformation gauge.

Third, he asked what the word ‘reluctance’ meant in the NT and DTIC’s presentation.

Fourth, he asked if black ownership stood at 39.5%. If so, this showed that the ANC-led government had failed to provide a full transformation of the economy.

Fifth, he asked what was being done to avoid the repetitive empowerment of the same elites.

Mr Hanival indicated that some of the questions raised were subject to discussion with the Minister of the DTIC as the department is currently undergoing a policy review. As such, he could not respond to the question on re-allocating points to black ownership.

One significant change in the BEE model from the first two administrations to now is the move to a broad-based model. The idea behind providing points for skills development, ESD, and other factors was to move away from the pattern of the same elites benefitting repeatedly from tenders. Even if the same number of black beneficiaries continued to benefit from procurement, those funds would still go into skills and supply development, thus benefiting a much broader cohort of individuals.

The department believed that this was a positive element of the new broad-based model, and it would take up the question of whether more points should be allocated for black ownership with the Minister. Furthermore, it planned to interrogate the figures even further, he said.

On why Sanlam conducted a transformation gauge, he was unsure as to why it had done it. Over the years the department has attempted to create a big sample of information. However, many of these reports suffered from the challenge of having to depend on self-reporting, with not all verification agencies looking as deeply into companies’ BEE levels as the department would have liked. As such, often, the department will need to independently look at whether a company is actually at level 1 or not.

Presently, black ownership is between 30% and 40%. The department did not have reliable data across the public and private sectors to state the overall impact of black ownership on the economy.

Mr Mathebula mentioned that previously procuring institutions did not perform independent verification checks on whether a company was actually BEE level 1 until the CC judgement, so they only relied on the certificate submitted by bidders.

Mr Ntlaba outlined that, under the B-BBEE Act, small companies have to submit a sworn affidavit to claim their BEE level. However, the department has noted problems with this, as some people have had their affidavits stamped despite making representations. As such, the department is looking into tightening up the controls of this process.

The Chairperson agreed that these controls should be tightened up.

Ms Mahlangu also supported the idea as she previously found that some individuals would register their companies under the names of their domestic workers.

The Chairperson asked the department to take Members through the PP Bill slide presentation.

Briefing on the NT’s responses to submissions received during the public hearings of the PP Bill

Adv Van Schoor took Members through the remaining comments and responses they had not dealt with.

The Chairperson pointed out that set-asides were not unconstitutional.

Adv Van Schoor mentioned that they were contained in the 2017 Regulations.

The Chairperson asked about the court’s issue with the set-asides in the 2017 regulations.

Adv Van Schoor explained that the department issued regulations that had set asides and subcontracts, and the court said the Minister did not have the authority to make such regulations, as the regulation-making power in the PPPFA was very limited to anything necessary or expedient.

The Chairperson asked how the department would avoid that from happening again.

Adv Van Schoor said that by being specific in Chapter 4 on what powers the Minister had to make regulations.

The Chairperson asked that, in this case, the legislation would set out the power and not the Minister.

Adv Van Schoor confirmed this was the case.

Adv Jenkins agreed with the department’s proposal.

The Chairperson said that he previously asked the department if the instructions from the PPO were binding, to which it denied. However, the Bill said that they are binding.

Adv Van Schoor could not recall making that statement. Nonetheless, she mentioned that the instructions were binding.

The Chairperson asked that Members stay for 10 minutes to complete the deliberations.

Regarding the view submitted by stakeholders that the Bill should incentivise whistleblowers and provide for protection, he asked if any country did so.

He agreed with the department that the dispute resolution procedures would save costs and improve turnaround times in service delivery.

In its report, the Committee highlighted its concern about the extent to which the Minister is expected to regulate and recognised that there were too many uncertainties. As the department began to implement the Bill, Parliament would get a better sense of what the Minister should regulate and limit it to the minimum necessary.

Adv Van Schoor said one of the concerns raised by stakeholders was that too many areas were to be prescribed by the regulations.

The Chairperson asked the department to respond to this.

Adv Van Schoor remarked that the department clarified this was for compliance and preventative measures.

She told Members that the department compiled a 600-page document that made proposed amendments not referred to in the presentation. It would highlight the proposals in a different colour in the Bill.

The Chairperson asked if the department was proposing them for amendment in the Bill.

Adv Van Schoor confirmed that it was.

The Chairperson stressed that the proposals made on the Committee’s policy decisions could be effected in the Bill, as Parliament decided on legislation. The department must make clear any amendments made over and above what was agreed to in terms of policy.

Adv Van Schoor repeated that these amendments would be highlighted in a different colour.

Closing remarks by the Chairperson

The Chairperson thanked all those involved in the process from the beginning, especially the opposition parties, who engaged robustly despite ideological differences. He added that members formed part of a multiparty committee in a multiparty Parliament and were much more aligned on issues than believed.

He believed the Committee could vote on the Bill by Tuesday the 7th if it sat for four hours from 09:00 to 13:00 on Tuesday, three hours on Thursday and another three hours on Friday. If it can conclude its deliberations by Friday, the Committee will send out the Bill on the same evening to civil society organisations to receive comments on Monday morning.

However, he stressed that the Committee would not sacrifice its legislative responsibility to conclude the process within time.

The meeting was adjourned.