Finance Minister Gigaba moments before delivering his budget policy address. Picture: ELMOND JIYANE
Finance Minister Gigaba moments before delivering his budget policy address. Picture: ELMOND JIYANE

The long-awaited Public Procurement Bill will be submitted to the Cabinet in March, paving the way for black-, youth-and women-owned businesses to get larger stakes in state procurement, which runs into billions of rand.

This initiative was announced by Finance Minister Malusi Gigaba during his budget speech on Wednesday.

In 2015-16, the government’s cumulative procurement budget was projected at R600bn, and it was to be divided among more than 1,000 procurement entities — from small municipalities and metros to national departments and state-owned companies.

Taking a leaf out of President Cyril Ramaphosa’s maiden state of the nation address on Friday night, Gigaba said in delivering his maiden budget that the government would place emphasis on youth-owned enterprises, especially those owned by black people and women.

“Public procurement ... is a critical lever to change the production and ownership of the economy to empower black people, women and the youth,” said the finance minister.

The government’s preferential procurement regulations, which came into effect in April 2017, included compulsory sub-contracting to designated groups on all projects and contracts worth R30m, as well as the designation of sectors and industries for localised procurement and job creation.

“Treasury will increase collaboration with all law-enforcement agencies to strengthen efforts to fight fraud, corruption and abuse of the supply chain management system across all spheres of government in order to restore the integrity of the system,” said Gigaba.

The government would also embark on a review of “evergreen contracts”, where larger companies got state business in perpetuity, in the process isolating smaller — mostly black, women and youth-owned businesses — from opportunities.

“Evergreen contracts create barriers to entry, making it impossible for new entrants to participate in the allocation of government contracts.

“SMMEs [small enterprises] and black-owned companies find it very difficult to participate in procurement opportunities as a result,” lamented Gigaba.

“Next week, the director-general of National Treasury will issue a directive to all government departments and public institutions, instructing them to pay suppliers on time, or ... [risk being] charged with financial misconduct,” Gigaba said.

Small business has long bemoaned late payments from the state, citing this as one of the leading causes of the high failure rate in the sector.

 

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