Treasury revises Preferential Procurement Regulations

Pretoria - National Treasury has revised the Preferential Procurement Regulations, 2017, which were gazetted on 20 January 2017.

The regulations were initially promulgated in 2001 and revised in 2011, making this the second revision since the initial promulgation.

“The revision of the Preferential Procurement Regulations of 2011 was largely influenced by the need to provide for a mechanism to empower certain categories –Small, Medium and Micro Enterprises (SMME), also classified as EMEs or QSEs, co-operatives, Township and rural enterprises -- through procurement,” said Treasury in a statement on Monday.

The decision was an outcome 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, the commitment made by government was to leverage public procurement.

“The revised regulations are also aligned to President Jacob Zuma’s pronouncement in his 2015 State of the Nation Address, where he said that government will set aside 30% of the appropriate categories of State procurement for purchasing from SMMEs, co-operatives as well as township and rural enterprises,” Treasury said.

Finance Minister Pravin Gordhan said 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 local industrial development.

This, he said, is in line with the current dialogue on inclusive economic growth in South Africa.

Some of the revisions include:

  • Introducing the prequalification criteria that allow the advancement of these selected categories of people by limiting competition only amongst themselves. This restricts the inclusion of well established companies, unless they meet the further requirements of subcontracting to these groups should they (established company) be successful.
  • Acknowledging that in the main, the high value tender 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 the tendering stage.
  • 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 the threshold to R50 million. This now gives smaller companies greater chances of competing in the economy in a meaningful way.

Minister Gordhan extended National Treasury’s appreciation to all South Africans, both institutions and individuals, who took the time to submit comments on the Draft Preferential Procurement Regulations.

The Minister said while not all comments and suggestions could be incorporated in the final set of regulations, they did provide valuable insight and assistance in finalising the regulations. –