The Preferential Procurement Regulations 2017 have been gazetted on 20 January 2017. The regulations were initially promulgated in 2001 and revised in 2011 thus making this the second revision since the initial promulgation.
The revision of the Preferential Procurement Regulations of 2011 was influenced by the need to empower certain categories (Small Medium and Micro Enterprises (SMME) also classified as EMEs or QSEs, Co-operatives, Township and Rural enterprises) through procurement. This was a product of social dialogue on the New Growth Path (NGP), wherein government and social partners signed a Local Procurement Accord on 31 October 2011. To this end, a commitment was made by government to leverage public procurement.
The revised regulations are also aligned to President Jacob Zuma’s pronouncement in his 2015 State of the Nation Address, wherein he said, that government will set-aside 30% of appropriate categories of State procurement for purchasing from SMMEs or co-operatives as well as township and rural enterprises. Also, giving impetus/ incentive to the NGP. The highlights of the revision are:
- Introducing the prequalification criteria, which allows the advancement of these selected categories of people, by limiting competition to only amongst themselves. This restricts the inclusion of well-established companies, unless they meet further requirements of subcontracting to these groups, should they (established company) be successful. (Refer to regulation 4).
- Acknowledging that in the main, that high value tenders in the region of R30 million and above tend to be awarded to established companies, due to economies of scale and affordability, leaving out categories of aspiring businesses. The revised regulations require all those, with the ability to deliver the required service, to demonstrate the element of subcontracting to the categorised groups at a tendering stage. (Refer to regulation 9).
- Addressing the outcry of the categorised groups, who felt that the threshold of R1 million is too insignificant for them to grow to a level of established companies. Current regulations have increased to R50 million. This now gives smaller companies a greater chance to compete in the economy, in a meaningful way. (Refer to 6 & 7)
Commenting on the release of the regulations, the Finance Minister said that the regulations aim to use public procurement as a lever to promote socio-economic transformation, empowerment of small enterprises, rural and township enterprises, designated groups, and the promotion of local industrial development. He said this is in line with the current dialogue on inclusive economic growth in South Africa.
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