Warning signs for SA’s new BEE plan

Civil organisations and opposition parties have warned that the South African Government’s plan to evaluate government tenders only 50% on price and the rest on black empowerment will increase the cost of goods, harm service delivery and lead to corruption and abuse.

The independent educational charity, the Institute for Race Relations, as well as the official opposition, the Democratic Alliance (DA), are questioning the National Treasury’s suggested new affirmative action plan. According to the plan  government tenders up to R10m will in future be evaluated only 50% on price, while the preferential weighting for black economic empowerment (BEE) will also count 50%. Previously the weightings were 90/10 or 80/20.

This, they say, will only promote corruption and harm service delivery.

The IRR says warns in a statement the draft regulations published last week will increase the costs of goods and services procured by the Government and thereby harm service delivery. “The increased BEE weighting will encourage inflated prices from a small politically connected elite of BEE ‘tenderpreneurs’ – thereby subordinating the interests of the poor to the interests of this small elite.

“The proposed regulations provide yet another reason why the Government should move away from current models of BEE and embrace the alternative policy of ‘EED’ or ‘Economic Empowerment for the Disadvantaged’ that we are busy developing,”  says the IRR.

The DA’s Shadow Minister of Trade and Industry, Geordin Hill-Lewis, says the proposed amendments to the Preferential Procurement Regulations are “irrational and ought to be scrapped”. He has already written to the Minister of Finance, Nhlanhla Nene, to do so.

By increasing the ‘empowerment’ thresholds, sasy Hill-Lewis, “threats” to the procurement process will increase, “which is already viewed with scepticism and discontent by the public. The process will now become even more susceptible to abuse and manipulation, serving to benefit a small elite at the expense of the majority of South Africans.

“In effect the regulations allow bidders to increase their price by up to 50% more than market value, and still win the tender. This will have a damaging effect on our economy and our national fiscus. By paying more of a premium on tenders, less money will be available for government to spend on service delivery, which negatively impacts poor and disadvantaged South Africans the most.”

Hill-Davis says only a small group of already wealthy and well-connected businesses use BEE as a scheme to further enrich themselves. This new proposal exacerbates that problem. It only leads to more public money flowing to a small group of well-connected cronies, and less public money going to the actual delivery of services. We support rational and fair broad-based empowerment, that gives credit for actually growing the economy and creating jobs, and does not just see as its end the creation of a few billionaires at the cost of the public.

“Procurement policy should focus on truly involving new entrants in the economy, including giving preferential treatment to those previously disadvantaged South Africans who have not been awarded tenders in the past. This will go far to ensure that Black Economic Empowerment is truly broad-based, to benefit the millions of disempowered South Africans who remain outside of the economy.”

What do you think? Do you worry that government regulations seems to be dictated by powerful lobby groups who are close to President Zuma? Do you think lobby groups represent well-connected BEE billionaires and multi-millionaires? How should empowerment focus on the transfer of ownership to benefit the majority of people disadvantaged by apartheid? 

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