November 10, 2004

New regulations for black economic empowerment

New “black businesses” will find it easier to win bigger government procurement contracts under proposed changes to the state’s buying rules. The changes will double the tender value of those contracts where government gives relatively more weight to empowerment and social criteria. Currently, projects worth up to R500.000 allow firms to earn 20 bidding points per contract for meeting social and empowerment objectives. The other 80 come from the price they quote. Under the proposals, the top value of these "empowerment-weighted" contracts will rise to R1m. For government contracts valued at more than R1m, bidders will have to score only 10 points for meeting socioeconomic objectives and 90 points for price. The proposed changes, which were published in the Government Gazette for public comment, should encourage more previously disadvantaged individuals and small businesses to take up opportunities in public sector procurement, whose value is estimated at R80bn annually.
The new regulations define broad-based black economic empowerment as "the economic empowerment of all black people through diverse but integrated socio-economic strategies". The strategies aim to increase the number of black people who manage, own and control enterprises and productive assets and to facilitate the ownership and management of enterprises by communities, workers, co-operatives and other collective enterprises. Government will also reward companies that embrace skills development and achieve equitable representation in all occupational categories and at all levels of the workforce. In addition, these companies have to have preferential procurement policies of their own and invest in enterprises that are owned or managed by black people. Furthermore, a person awarded a contract as a result of preference for empowerment may not subcontract more than 25% of the value of the contract to a person who does not qualify for such a preference. However, Government has also been criticised that its empowerment legislation had led to the creation of a tiny black elite that benefited from multiple deals in the past. (Business Day, Johannesburg)

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