South African lobbying organisations promoting black empowerment are calling for the Preferential Procurement Policy Framework Act (PPPFA) to be repealed because it places too much emphasis on price.
The Progressive Professionals Forum (PPF), which lobbies to address socio-economic disparities and promote Broad-Based Black Economic Empowerment (B-BBEE), says the law prioritises competitiveness and cost-effectiveness.
The PPFA stipulates that government organisations allocate points when putting contracts out to tender in relation to how functional they are, their price and how they achieve the goals of the Reconstruction Development Programme (RDP) – the government’s socio-economic policy framework aimed at redressing poverty and inequalities in public services.
The ‘preference point system’ states that contracts worth less than R1 million can receive up to 80 points based on price and functionality and 20 based on RDP goals. Contracts over this amount will be allocated 90 points for price and functionality and 20 points for RDP goals.
Mzwanele Manyi, president of PPF, said: “The PPPFA as it currently stands awards a whopping 80 per cent or 90 per cent of points to the lowest price from among the tenderers and a mere 20 per cent or 10 per cent to recognise black empowerment,” he said.
“PPPFA has taken away the reason for companies to embrace transformation because indeed why would monopoly capital be bothered with B-BBEE if they can get up to 90 per cent of points purely on lower price?"
Manyi said that the Act is also the “primary reason for the continued existence of oligopolies”, whose size and scale make it impossible for other companies to compete.
“Big corporates also enjoy 90 days trading terms, unlike the emerging entities that must pay cash with borrowed funds, which also would have come at a high cost because of the perceived risk of new entities,” he added.
Meanwhile, the Black Business Council has also called for the PPPFA to be ditched because its provisions are conflicting with the Broad-Based Black Economic Empowerment Act 2003, which is aimed at reversing the effects of apartheid and distributing wealth among disadvantaged people.
The National Treasury has not responded to SM's request for comment.