5 minute read
Public Procurement Act
New Public Procurement Law Set to Enhance Transparency and Black Empowerment
By Shumirai Chiombe
President Cyril Ramaphosa signed into law the Public Procurement Act 28 of 2024 on 23 July. The Act will see measures being put into place to eliminate corruption and increase transparency in the awarding of government contracts. The measures also aim to streamline the procurement process through technology, and ensure improved equity for local businesses and previously disadvantaged individuals and entities.
The Act seeks to create a single framework that will regulate public procurement, including preferential procurement, by all organs of state with efficiency and integrity.
In his weekly newsletter addressing the nation on 29 July, the President said that the newly signed Act is another important step in ensuring that public funds are put to use where intended. “As we intensify our collective efforts to build an inclusive economy that creates jobs, the Public Procurement Act allows us to make [the] best use of public funds to support transformation and local development. At the same time, by implementing measures to prevent the abuse of public procurement, the Act will help to ensure that public funds are put to the uses for which they are intended.”
In a boost for local businesses, a major feature of the Act is that it mandates prioritizing contracts for black-owned businesses and local firms through set-asides for preferential procurement.
“Public procurement is about getting the best value for the state. It is also an opportunity to promote transformation of the economy and society. The new law therefore provides for set-asides in the allocation of contracts to advance companies owned by people historically disadvantaged by unfair discrimination.”
The Act states that a procuring institution must set-aside a bid for a category of persons in accordance with the prescribed thresholds and conditions. The categories include black people; black women; women; black people with disabilities; people with disabilities; youth, military veterans, persons in a particular geographic area and small enterprises.
Persons in these categories must be citizens of the Republic, and enterprises eligible for preferential procurement must be owned and managed by black people in terms of the applicable code of good practice on black economic empowerment issued in terms of the Broad-Based Black Economic Empowerment Act, 2003.
The President added that the Act “will enable and encourage the procurement of goods that are produced and services that are provided in South Africa. It will enable government and public entities to use procurement more strategically and effectively to promote the growth of local industry and to create jobs to meet the needs of the state.” In this regard the Act requires that the Minister responsible for trade, industry and competition must, by notice in the Gazette, designate a sector, sub-sector or industry or product where only locally produced or manufactured goods meet the stipulated minimum threshold for local production and content, taking into account economic and other relevant factors.
The Minister must also stipulate a minimum threshold for local production and content, and the period of the designation. “The approach in the Act is in line with the Constitutional requirement that public procurement must be done in accordance with a system which is fair, equitable, transparent, competitive and cost-effective. The Constitution also says that this should not prevent procurement policies that provide for the protection or advancement of people disadvantaged by unfair discrimination.”
Establishing A Public Procurement Office
In another significant step, the Act addresses a major weakness in the procurement of goods and services by organs of state which was fragmented and regulated by multiple pieces of legislation. This left the process open to various forms of abuse in the past.
The President explained that the Act is part of the implementation of the Judicial Commission of Inquiry into State Capture report recommendations on how to prevent corruption in government procurement. The report recommends the establishment of an independent agency against corruption in public procurement to address the problem.
“Among other things, the law establishes a Public Procurement Office in the National Treasury, which must put in place measures to ensure the integrity of the procurement process. All the members of this office must perform their functions impartially and without fear, favour or prejudice. The Public Procurement Office must promote standardisation in procurement and modernise the system through technology and innovation. The law focuses on the people who are involved in procurement, requiring them to comply with a code of conduct and receive professional development and training.”
Some of the functions of the Public Procurement Office will include ensuring compliance with the Act by procuring institutions; developing and supporting the implementation of necessary measures to maintain the integrity of the procurement process; guiding and supporting officials in complying with the Act; and developing measures to ensure transparency in procurement.
Use of Technology in Procurement
The use of technology will play a key role in ensuring transparency in the awarding of government tenders. This includes disclosing procurement information such as awards of bids, the process followed and the identity of suppliers awarded contracts. The Public Procurement Office will be mandated to develop an information and communication technology-based procurement system to enhance efficiency, transparency, and integrity, and to combat corruption.
The system will be designed to provide a single platform that allows officials, bidders, suppliers and the public to have access to all procurement-related services. “No longer will tenders be awarded in dark corners far from public scrutiny,” wrote the President.
The Public Procurement Act will be administered by the Minister of Finance and it will apply to all state departments, institutions, municipalities and other public entities.
