Minister repeals SOEs’ BEE requirement for white-owned companies

Minister of Finance Enoch Godongwana. Picture: Phando Jikelo/African News Agency (ANA)

Minister of Finance Enoch Godongwana. Picture: Phando Jikelo/African News Agency (ANA)

Published Nov 9, 2022


Cape Town - Gone are the black economic empowerment tender days at state-owned entities (SOEs) as Finance Minister Enoch Godongwana repealed a requirement that forced state companies to disqualify 100% white-owned companies that fail to meet BEE points.

Godongwana has promulgated new regulations, which exempt Eskom, Transnet and other SOEs from complying with BEE point-scoring regulations, replacing a 2017 law.

This comes days after Eskom board member Mteto Nyati decried the affirmative action policy.

The canned regulation states that if a state organ decides to apply pre-qualifying criteria to advance BEE, it must advertise the tender with a specific tendering condition that only one or more of the following tenderers should apply: a tenderer having a stipulated minimum Broad-Based Black Economic Empowerment status level of contributor, qualifying small enterprises in terms of the B-BBEE Act, a tenderer subcontracting a minimum of 30% to a company which is at least 51% owned by blacks.

The old regulation read: “A tender that fails to obtain the minimum qualifying score for functionality as indicated in the tender documents is not an acceptable tender.”

The repealed regulation – known as the Preferential Procurement Regulations 2017 or gazette number 40553 of 20 – states that a tenderer must submit proof of its B-BBEE status level of contributor.

A tenderer failing to submit proof of B-BBEE status level may not be disqualified, but may score zero points out of 20 for B-BBEE for contracts between R30 000 and R50 million.

The new legislation to come into effect in January repeals the regulation.

DA MP and spokesperson on finance, Dr Dion George, said Godongwana had been talking about procurement for a while “but it has mostly been incoherent”.

The DA doesn’t know what a new Preferential Procurement Bill will do, but these regulations are “silent on BEE, and we welcome that. BEE is one of the most significant interventions in our economy, ever, and has distorted it.

“It made our markets less efficient and forced business to price in rent-seeking middlemen who benefited only a tiny few and made them extremely rich.”

George said last week Ramaphosa had said BEE was enshrined in the Constitution, “so it’s not clear what the position actually is. What is certain is our economy is failing and BEE is one of the root causes”.

On Newzroom Afrika on Monday, Business Unity chief executive Cas Coovadia said: “We have to balance the need for transformation and the need for economic empowerment … The priority for Eskom is to get the energy situation sorted out as urgently as possible.”

If BEE legislation in relation to procurement hampers Eskom’s ability to deal with the energy crisis, then the balance has to fall on Eskom procuring from companies ready to deliver services, Coovadia said.

In a statement, Godongwana said he and Treasury executives would address the media today after the gazetting of the Preferential Procurement Regulations 2022. They were developed after the Constitutional Court ruling of February 2022 on the 2017 Preferential Procurement Regulations and followed public submissions on draft regulations published for comment in March 2022.

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Cape Argus