LETTER: Act favours disadvantaged groups

Terence Grant is correct in saying the recently signed Public Procurement Act is unconstitutional. (“Bill is unconstitutional”, July 30).

But that is not the extent of its weakness. Post 1994 the ANC-led government designed a sensible set of BEE laws. These provided for a 10%-20% price preference for black contractors. 

This formula gave an edge to previously disadvantaged companies as against established companies. Tragically, this modest but valuable price advantage was often observed in the breach.

Black-owned companies were at times granted contracts vastly in excess of competing market prices. The limit of a 20% price preference was simply ignored. The abandonment of the price rules was at the heart of the cancer of state capture under former president Jacob Zuma.

President Cyril Ramaphosa is portraying the Procurement Act as a move away from state capture. But is it? The act entrenches set-asides in favour of disadvantaged groups. A portion of all state contracts must go to such groups — seemingly regardless of price.

The original concept of a limited 20% price differential had the great advantage of facilitating competition across ethnic boundaries. It would have been far preferable to have increased the original 20% pricing advantage to, say, 30% or more. 

Retaining the preferential pricing mechanism would have meant all players remain in the same competitive arena. The set-asides, on the other hand, set up unfortunate barriers between the different groups.

Willem Cronje
Cape Town

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