New Tender Rules Will Boost Key Industries
Zwelifile Ntuli

8 November 2011

Key to the ANC Government`s agenda is ensuring that state-led industrial policy leads to the transformation of the economy. We therefore take note of the progressive step taken in this regard with the announcement of new preferential procurement regulations which come into effect on 7 December 2011. In essence this will allow companies with broad-based black economic empowerment ownership will score extra points when bidding for government procurement contracts.

The goal is to promote black economic empowerment and ensure the state sources a maximum of supplies and services from local companies, without compromising competitiveness. The reform extends preferential procurement rules to major public entities such as Eskom, Transnet, the Development Bank of Southern Africa, the CCMA and all their subsidiaries.The new regulations will also apply to all national and provincial government business enterprises, ranging from Khula Enterprises to regional water boards and development zones.
These regulations also target the practice of "fronting" fraud. Section 11 of the regulations state that the tenderer may not be awarded points for his BEE status level if he states that he intends to sub-contract more than 25% of the value of the contract to another enterprise that does not have the same status level. Successful bidders will also not be allowed to sub-contract in such a manner that the local content of the contract drops below a minimum threshold.

The regulations compel any state body that discovers that the BEE status level has been "claimed or obtained on a fraudulent basis" to act against the tenderer.