Post on 15-Dec-2015
Association of BEE Verification Agencies 2nd Business Breakfast
The Implication of the Alignment of the PPPFA on Business
Protea HotelBalalaika Sandton
20 Maude Street, Sandown, Sandton, Johannesburg
Thurs, 05th November 200907h30 for 08h00 to 10h00
Agenda
Registration: 07h00 – 07h30
Breakfast: 07h30 – 08h00
Welcome & Presentation: 08h00 – 08h30
Questions & Answers: 08h30 – 10h00
Panel
1. Mr. Andile Tlhoaéle ABVA Chairperson
2. Mr. Kganki Matabane Business Unity South Africa (BUSA)
3. Mr. Thami Mazwai CBBO
4. Mr. Duma Gqubule Kio Advisory Services
PRESENTATIONS PROVIDED BY:
ABVA hereby thanks:
Mr. Kganki Matabane, Executive DirectorBusiness Unity South Africa (BUSA)
&Mr. Duma Gqubule, Director
KIO Advisory Services
For providing the presentations at ABVA’s 2nd Breakfast Session
BUSA’s views on PPPFA alignment
Presented by Mr. Kganki MatabaneExecutive Director, BUSA
CONTENT:
1. INTRODUCTION
2. CURRENT REGULATIONS
3. DRAFT REGULATIONS
4. CONCERNS
5. CASE FOR LOCAL CONTENT
6. SHORT TERM INTERVENTIONS
7. MEDIUM/LONG TERM INTERVENTIONS
8. CONCLUSION
BUSA
INTRODUCTION •State procurement is critically important in achieving Transformational, Economic and Industrial objectives
•Leveraging of Public Procurement Programmes in support of B-BBEE and local production are critical elements to achieving these objectives
•Ideal intervention is the amendment or REPEAL of the Act without delay
•Preference point system is inherent in the Act
•We recognise that an amendment to the Act is a protracted process
•Have reviewed the draft Regulations in context of B-BBEE & support for local production
BUSA
CURRENT REGULATIONS
Discourages B-BBEE compliance by White Business (11% penalty)
Provisions of the Act are in conflict with those of Section 10 of the BEE Act
Section 10(b) of the BEE Act cannot be said to trump the 90/10 or the 80/20 preferential point provisions of the Act, as these are prescribed in the main body of the Act.
Current approach encourages fronting
BUSADRAFT REGULATIONS
Preferential Procurement Regulations will be extended to all organs of state for uniformity purposes
Definition - Black people vis a vis HDIs
Incorporation of the 7 elements
Use of accredited Verification Agencies
BUSACONCERNS
ROLE CLARIFICATION -TREASUTY & DTI
• New Treasury Regulations would incorporate SCM Regulatory Framework (including preferential procurement)
• Section 10(b) of the BEE Act provides that, “every organ of state and public entity must take into account and, as far as is reasonably possible, apply any relevant code of good practice issued in terms of the BEE Act in developing and implementing Preferential Procurement Policy”
BUSACASE FOR LOCAL CONTENT/PRODUCTION
Promotion of SA owned enterprises
Creation of new decent jobs and the intensification of labour absorption.
Local producer contributes 30% or 30 cents more back into the economy for every R1 procured in the public sector
BUSA
SHORT-TERM INTERVENTIONS
Retain the current point system
Increase the R1m threshold
Section 11 (1) of the Regulations should be clear on the Specific Industries
Find a way of introducing “set asides” E.g. Dti 10 products
Should two or more bids be equal - share the awards
BUSAMEDIUM/LONG TERM INTERVENTIONS
Amendment or the ultimate repealing of the Act
Adopt B-BBEE Act and Codes of Good Practice
Establish a joint working Group between Treasury, Dti and Business
agree the key principles in respect to BBBEE, local procurement and Industrial Policy alignment
Include of “set asides”
Role clarification between Dti and Treasury
BUSACONCLUSION
Submission intended to provide constructive & programmatic inputs
Strengthen both B-BBEE and support for local production
Preferential Procurement is an important instrument in achieving our Country’s Socio-Economic, Transformational and Industrial objective
Context of fiscal constraints and best value for money in public procurement
KIO Advisory ServicesPREFERENTIAL PROCUREMENT AND B-BBEE
Can be the most important tool for economic transformation
– Was used effectively by the apartheid government for Afrikaner empowerment after 1948
Two ways to create a black company
– Borrow to buy minority stake in white company and pray (Standard Bank, Mvelaphanda)
– Preferential procurement get immediate cash flow and retain black shareholding (Business Connexion, Gijima AST, ARM)
Must leverage private and public procurement
KIO Advisory ServicesPREFERENTIAL PROCUREMENT–PRIVATE SECTOR
Ongoing review of BEE must be part of the policy
framework. Already know what is not working
Preferential Procurement IS NOT WORKING
– Opportunistic point scoring for established business
not true transformation
– Failed dismally to incentivise procurement from
black owned businesses
KIO Advisory ServicesPREFERENTIAL PROCUREMENT–PRIVATE SECTOR 75% of the points for procurement from all suppliers and QSEs/EMEs
– Minimalist compliance focus on existing suppliers not new
suppliers
– Can get 15 points without procuring a cent from any black-owned
business
– Can meet the target by procuring from Level 7 contributors to
BBBEE with a score of 40 to 45 points and a BBBEE recognition
Level of 50%. Target is too low
– Need new PP scorecard with higher weightings and targets for
procurement from black business
KIO Advisory ServicesPREFERENTIAL PROCUREMENT - PUBLIC SECTOR
80/20 preference point system for procurement up to R1m
KIO Advisory ServicesPREFERENTIAL PROCUREMENT - PUBLIC SECTOR
90/10 preference point system for procurement above R1m
KIO Advisory Services
PREFERENTIAL PROCUREMENT - PUBLIC SECTOR Public Sector not implementing BEE Act
Not implementing or reporting on set aside policy
Draft PPPFA regulations aligned with BEE Act – will reverse the gains made by the public sector over past 15 years
Organs of state and public entities have exceeded LOW targets in the BEE Codes
– The Codes are for private sector
Public Sector Charter must have own scorecard and targets
Public Sector Charter must have legislated reporting requirements for all organs of state and public entities
KIO Advisory Services
PREFERENTIAL PROCUREMENT - PUBLIC SECTOR
Proposed 50/50 preference point system for procurement up to R100m
KIO Advisory Services
PREFERENTIAL PROCUREMENT - PUBLIC SECTOR
Proposed 60/40 preference point system for procurement above R100m
KIO Advisory Services
PREFERENTIAL PROCUREMENT - PUBLIC SECTOR Threshold must be increased to R100m
50/50 for contracts less than R100m
60/40 for contracts above R100m threshold
Set asides for black-owned companies
Dual BBBEE evaluation strategy
– 50% for scorecard;
– 50% for black ownership and black women ownership