PREFERENTIAL PROCUREMENT WORKSTREAM ALIGNMENT OF SCM AND B-BBEE LEGISLATIONS TASK TEAM CONSISTS OF DEDT - BEE UNIT AND PROVINCIAL TREASURY - SCM OFFICIALS. • INVESTIGATE CLASHES BETWEEN SCM AND B-BBEE LEGISLATIONS. • HARMONISE THESE LEGISLATIONS • ANALYSE PROCUREMENT SPEND OF THE PREVIOUS YEARS. • CONSULTATION WITH OTHER DEPARTMENTS WHICH HAVE B-BBEE PROGRAMS IN PLACE. • DEVISE STRATEGY FOR THE IMPLEMENTATION OF TARGETS OF THE CODES OF GOOD PRACTICE • PROPOSE RECOMMENDATIONS AND POSSIBLE SOLUTIONS TO B-BBEE IMPLEMENTATION CHALLENGES AND SUBMIT MEMO TO CABINET. • Legislative Framework Investigated • Section 217 (2 and 3) of the Constitution of RSA •Preferential Procurement Policy Framework Act 5 of 2000 and its regulations • Promotion of Administrative Justice Act of 2000 • Public Finance Management Act • Broad Based Black Economic Empowerment Act 5 of 2003 • Codes of Good Practice Principles of the Constitution The constitution stipulates that procurement of goods and services should be in accordance with a system that is: •Fair • Equitable •Transparent •Competitive •Cost - effective Objectives of SCM and B-BBEE • To give effect to the provisions of the Constitution, 1996; • To give effect to the provisions of the PFMA and the MFMA; • To transform the procurement and provisioning functions in government into an integrated supply chain management function; •To create a common understanding and interpretation of government’s preferential procurement policy objectives; and • To promote consistency in respect of supply chain policy and other related policy initiatives in government. SCM & BEE Objectives Continued •Promote economic transformation. • Achieve substantial change in the racial composition of ownership and management structures. • Increase the extent to which communities, workers, cooperatives and other collective enterprises own and manage existing and new enterprises. • Increase the extent to which black women own and manage existing enterprises and increase their access to economic activities. • Promote investment programmes that lead to broad-based and meaningful participation in the economy by black people. • Empower rural and local communities by enabling access to economic activities, land, infrastructure, ownership and skills. Procurement Spend analysis • Spend Analysis revealed that R3.6 billion was paid to top 50 companies. • Only R740 million, 23% of the R3.6 billion was found to have been spent on BEE compliant companies. • The R740 million constitute only 4,8 percent of the total procurement budget.( BEE compliant benefit only 4.8%) • While departmental procurement spend may vary however this reflect the Provincial Government procurement spend. Objectives of the Codes of Good Practice • To address the challenge of incoherent implementation of BEE. •To provide a standard implementation process of BEE in an integrated and coherent manner to bring about economic transformation of South Africa • To provide consistency, and clear direction to BroadBased Black Economic Empowerment. Public Sector Scorecard Preferential Procurement BEE Procurement Spend from all Suppliers based on the BEE Procurement Recognition Levels as a percentage of Total Measured Procurement Spend Weighting points 20 12 Compliance targets Years 0-5 Years 6 - 10 50% 70% BEE Procurement Spend from Qualifying Small Enterprises or Exempted Micro-Enterprises based on the applicable BEE Procurement Recognition Levels as a percentage of Total Measured Procurement Spend 3 10% 15% BEE Procurement Spend from any of the following Suppliers (regardless of their BEE Procurement Recognition Level) as a percentage of Total Measured Procurement Spend: 1. Suppliers that are more than 50% black owned (3 out of 5 Points) or 2. Suppliers that are more than 30% black women owned (2 out of 5 points) 5 15% 20% Public Sector Scorecard Enterprise Development Average annual value of all Qualifying Contributions made by the Measured Entity measured from the commencement of this statement or the Inception Date to the date of measurement as a percentage of the target Weighting Points 15 15 Compliance Target 3% of NPAT Codes of Good Practice • The 0 -5 years is 2007 – 2012 period while 6 -10 year period is 2013 – 0nwards • 50% compliance is for 2007 – 2012 period while 70% is 2013 onwards compliance target for Preferential Procurement scorecard • Departments need to budget for Enterprise Development initiatives that will ensure that selected companies are supported with relevant assistance consistent with Enterprise Development Scorecard. Recommendations The task team recommended that: • Provincial Government approves the implementation of Codes of Good Practice target of 50% - 70% as a policy. • The provincial departments / entities should appoint officials who would responsible for the implementation of B-BBEE in their respective organizations. • To ensure sustainability of projects by introducing contract management programme for medium to long term contracts. • Introduce submission of BEE certificates to Provincial Treasury as a requirement to ensure compliance by all companies doing business with Provincial Government with effect from 1 April 2010. Recommendations • Implementation of the DTI 10 products / service by all departments. Cabinet decision on 7 November 2007 that 85% of expenditure on the following 10 listed products and services be secured from SMMEs including co-operatives : – Advertising, media and communication; – Interior and exterior cleaning services and cleaning product supplies; – Clothing and textiles; – Computer equipment and consumable supplies; – Interior and exterior furniture and décor; – Events co-ordination and management; – Maintenance, repair, construction and office space; – Travel co-ordination and shuttle services; – Food perishable and supplies; and – Stationery supplies and printing. Recommendations Targets are primarily aimed at: • Procurement Opportunities For Co-operatives and SMMEs Departments and Public utilities must ensure that procurement fairly discriminate in favour of enterprises owned by women, youth and the people with disability.