A CHANGE to the Treasury’s procurement rules is essential if black business is to significantly gain from black economic empowerment (BEE) legislation, black business groups told the Department of Trade and Industry’s summit on empowerment last week.
The summit was held to measure progress made in BEE so far and to chart the way forward.
Black business groups led by the Black Business Council have put reform to the Preferential Procurement Policy Framework Act (PPPFA) at the top of their campaign agenda for the next phase of empowerment.
Speaking to delegates in a commission on the topic, Teddy Daka, executive chairman of Tedaka Technologies and former head of the South African Airways (SAA) tender board, said it was impossible for black-owned companies to compete with large firms when it comes to doing business with the state.
"Unless the PPPFA is changed, the gains of BEE will always be limited," he said.
The act puts in place a weighting of 80% on price and 20% on BEE score for smaller tenders, and 90% weighting on price with 10% weighting on BEE for larger tenders.
Black Business Council CE Xolani Qubeka said the body wanted to see "set-asides" for black business in state procurement contracts, a measure to which the government has not yet agreed.
"We are campaigning for black people to enter manufacturing and create companies that are sustainable. But the issue is how to do that when those that oppose it have the full backing of the law? The next frontier in the war will have to be changing the PPPFA to bring it in line with BEE," he said.
The move to change procurement regulations has been given impetus by the championing of the concept of "black industrialists", first raised by President Jacob Zuma in a speech to the Black Business Council a year ago.
At the summit, the president raised it again, saying that South Africa was "yet to see the growth of black industrialists despite government’s aggressive focus on lifting the manufacturing sector. The day we see factories all over the country owned by black entrepreneurs taking advantage of our Industrial Policy Action Plan (Ipap), we will be moving toward achieving our BBBEE goals," Mr Zuma said.
The concept also enjoys the support of Public Enterprises Minister Malusi Gigaba, who has emerged as a strong supporter of the need to reform the 90:10 rule.
Since taking over the portfolio, Mr Gigaba has provided support for black companies that aspire to get a greater cut of state spending by establishing black supplier forums.
Sandile Zungu, a member of the BEE Advisory Council and a leading member of the Black Business Council, said that the biggest challenge to the creation of black industrialists was "the failure by the state and state-owned enterprises to use the state’s massive buying power" to pursue this goal.
Mr Zungu said that within three months a summit with state-owned enterprises was planned to take Mr Zuma’s call for the creation of black industrialists "to a practical level".
Trade and Industry Minister Rob Davies said that discussions with the Treasury to reform the PPPFA were "ongoing".
"There is work in progress on these matters. But what we want to do is make sure that the tweaks to the PPPFA — which we support — benefit people who are involved in real, productive companies that are going to make a difference to empowerment rather than simply (contributing to) rent-seeking activities."