“There is no basis to say we are doing away with BEE.” says finance minister Enoch Godongwana
A lot of news has been circulating concerning BEE following the release of the Government Gazette 47452 on 4 November 2022. This document is an amendment to the Preferential Procurement Policy Framework Act (PPPFA) , an Act that placed controls on Government and SOE spending.
While it may seem that changes are coming to BEE, the Finance Minister has made it clear that the focus is on Government and SOE Procurement, relating to how proposals will be evaluated. What remains unclear is the impact this will have on the value chain, from entities that supply Government directly to the entities who supply them.
BEE Going Forward
Several viewpoints have already been suggested, speculating what impact this will have on BEE in the future. To be clear: these changes will not affect any BEE calculation, but will instead affect the use, need, and demand for BEE certification.
Let’s put the change in PPPFA into context. The BEE Act, the Codes, and the Charters comprise a measurement structure that is to be used by Government, SOEs and Private Companies alike to measure transformation goals. Government and SOEs use BEE when evaluating procurement as well as licencing and certification. Originally BEE was limited to only being used in the evaluation of bids under procurement but was extended to include licencing and certification in 2013 within the Amended BEE Codes.
The PPPFA regulates spending between Government/SOEs, who are major spenders in the SA economy, and the private sector. Therefore, any changes to how procurement is handled in this space will have reverberations across the economy.
What This Means For BEE and Procurement
The new Gazette of 4 November arose from a Constitutional Court judgement in February 2022 requiring the PPPFA to align with the Constitution (specifically S217).
In essence, the changes to the PPPFA, as of 2022, are as follows: the BEE scoring calculation and criteria is removed as a predetermined means to calculate either the 10 (of 100 points on the 90/10 criteria) or the 20 (of 100 points on the 80/20 criteria). The revised legislation now refers to two very important concepts:
- That the “10 or 20” be determined based on (transformation) goals
- That in January 2023 further clarity will be provided
Therefore, between now and January 2023 there is discretion for Government institutions and SOEs to determine how to calculate the “10 or 20” and align these goals more to their specific situations. Discretion is therefore a mechanism to provide for better alignment to S217 of the Constitution. S217 of the Constitution reads as follows:
“1. When an organ of state in the national, provincial or local sphere of government, or any other institution identified in national legislation, contracts for goods or services, it must do so in accordance with a system which is fair, equitable, transparent, competitive and cost-effective.
2. Subsection (1) does not prevent the organs of state or institutions referred to in that subsection from implementing a procurement policy providing for
a. categories of preference in the allocation of contracts; and
b. the protection or advancement of persons, or categories of persons, disadvantaged by unfair discrimination.
3. National legislation must prescribe a framework within which the policy referred to in subsection (2) must be implemented.”