schalkhuman.jpgThe Treasury is rethinking the draft preferential procurement regulations it published in June, and there is a possibility the revised version could claw back some of the more generous provisions for enhanced black economic empowerment.

“The latest revision of the regulations is expected to be submitted to Finance Minister Pravin Gordhan in September and could be ready for promulgation in October” said Schalk Human, Acting Chief Procurement Officer, National Treasury.

Human would not be drawn on whether — and how — the draft regulations would be changed, however, the Treasury was rethinking the regulations on the basis of the 125 or so inputs from captains of industry, the government and other interest groups.

He stressed the need for balance and to take into account the difficult circumstances of the fiscus at the moment. "There will be changes. It is all about affordability for the state," Human said.

He said there had been a number of designations of sectors in the past few months, which would affect any decision over the thresholds proposed in the regulations.

Government departments and public entities are obliged to procure in the designated sectors from local suppliers.

"Treasury is committed to the empowerment agenda but, with constrained economic growth, we also need to be prudent with costs. This might not be the right time for overstretching a burdened fiscal position in South Africa," Human said.

Any limitation of the scope for black companies to compete for government contracts would be opposed by empowerment lobby groups, such as the Black Business Council, which has criticised the heavy weighting given to price in the existing regulations.

They say this excludes black companies because they cannot compete with large, established companies on the basis of price.

The draft regulations proposed that the maximum threshold for the application of the 80-20 point system be increased from R1-million to R100-million to give more opportunities to black-owned companies to compete. In terms of the 80-20 preference point system, 80 points are assigned for the lowest price and a maximum of 20 points for the level of empowerment.

The Treasury also proposed that the minimum threshold for the use of the 90-10 preference point system — 90 points for price and a maximum of 10 points for broad-based black economic empowerment status — be increased from R1-million to R100-million, and that it would be compulsory for a minimum of 30% of the value of contracts above R30-million to be awarded to emerging suppliers.

Black Business Council secretary-general Xolani Qubeka said the council had made a submission on the draft regulations and any change to make them more restrictive would not be welcomed.

The council believed the only way to promote black economic empowerment was to repeal the Preferential Procurement Policy Framework Act.

This article first appeared on bdlive