Expanded BEE rules set to bleed the masses – Anthea Jeffery

Setting things to rights without serious consideration of the cost of the present context will inevitably aggravate an already very pear-shaped BEE public procurement policy. That’s essentially what Dr Anthea Jeffery, Head of Policy Research at the Institute of Race Relations, is saying here about the ‘upgraded’ BEE requirements of the Draft Public Procurement Bill, now out for public comment. She juxtaposes intended broadened access to the estimated R950bn in annual state procurement of goods and services, with statements that directly contradict the skewed and hugely expensive outcome of BEE policies – made by the actual guardians of the fiscus. Something is seriously amiss when once again, we witness ANC policies that embolden and encourage inflated quotes and sub-standard services and products in the name of corrective action. Or as Jeffery says, making rules that ‘benefit the few and harm the many.” It’s almost as if there’s a deliberate double standard at play in government behaviour; on one hand appoint all manner of commissions to uncover graft, corruption and fraud that peaked in the Zuma years, while on the other enacting laws that create the perfect environment for it all to continue. One could almost say they’re choreographing a macabre ballet. First published on The Daily Friend. – Chris Bateman

More BEE rules to benefit the few and harm the many

By Anthea Jeffery*

The Bill will make it even more difficult for businesses to predict how preferential procurement rules may change from time to time. Yet already firms find the uncertainty around BEE a major barrier to investing and doing business in South Africa. As the local subsidiaries of American companies pointed out in 2017, ‘no one plays a game where the goal posts keep shifting’ all the time.

In addition, the Bill will prohibit firms from contracting with the state at all unless they ‘comply with the Employment Equity Act’ (EE Act) of 1998. The EE Act is soon to be amended to give the minister of labour and employment the power to set binding racial targets for companies in different sectors. These targets are sure to be based on demographic representivity and to ignore the limited skills and experience of the black population, almost half of which is under the age of 25.

Powers not explained

Under the Bill, the minister will also be empowered to make regulations setting ‘market-related price ceilings for goods and services’. This power is not explained, but the wording suggests that the minister will be able to impose price controls in many contracts with state entities, including SOEs.

The minister’s power might thus be used to set the ‘developmental’ prices for Eskom coal that the government has failed to achieve under its proposed amendments to mining legislation. (These amendments were put before Parliament in 2013, but never successfully enacted.) Again, this would allow the executive to bypass the legislature and further undermine the separation of powers.

In addition, the Bill seeks to reduce spiralling procurement litigation by adding more layers to a mandatory dispute-resolution process. A dissatisfied bidder must first ask the relevant state institution to reconsider its decision. Thereafter he must apply to a new Public Procurement Regulator to examine that decision. Only once this has been done, may he seek relief from a new Public Procurement Tribunal. And only after the Tribunal has made its ruling may he approach the courts for judicial review under the Promotion of Administrative Justice Act (PAJA) of 2000.

The minister will appoint all the members of the new Tribunal, which will lack any vestige of institutional autonomy. Its hearings will be conducted as informally and ‘expeditiously’ as possible, and it will not be bound by the normal rules of evidence (despite their importance in securing credible testimony).

Dissatisfied bidders will need deep pockets to traverse all these steps in the dispute-resolution process before they can finally seek relief from the courts. In practice, many are likely to give up along the way.

Who will benefit from Bill? A host of township, rural, and other small enterprises are clearly to be given access to the R950bn public procurement pot as well. A broader range of people may be drawn in, but political connectivity will doubtless still largely determine to whom state contracts are awarded.

A narrow group of BEE ‘tenderpreneurs’ will draw lucrative ‘rents’ from the additional preferences. Price inflation will escalate, leaving less revenue available to fund delivery. The poor, as ever, will suffer the most, while the constitutional requirement for ‘transparent, competitive and cost-effective procurement’ will recede still further. So too will any realistic prospect of increased investment, growth, employment, and prosperity.

Article by BizNews