SCA judgment on procurement has 'no effect on B-BBEE Act'

The Broad-Based Black Economic Empowerment (B-BBEE) Commission has moved to clarify that a recent Supreme Court of Appeal judgment did not mean that state-owned entities could not set a 51% black ownership criteria for tenders.

The judgment on Monday declared that the preferential procurement regulations,  promulgated by former finance minister Pravin Gordhan in 2017, were invalid.

AfriBusiness, now known as Sakeliga, which had challenged the lawfulness of the regulations, said they had allowed organs of state the power to set their own discretionary and arbitrary minimum BEE requirement that a contractor must meet to be considered for doing business with the state.

It said this gave an organ of state the power to disqualify tenderers in advance, simply because a company was not, for example, 51% black-owned.

Sakeliga said the SCA had now rejected this pre-qualification as invalid.

However, the commission — an entity within the department of trade & industry — said on Wednesday that the declaration that the regulations were invalid was not a blow to B-BBEE requirements for prospective contractors as claimed by Sakeliga.

The commission said the judgment did not prevent any state entity from setting qualification criteria of 51% black ownership under the Broad-Based Black Economic Empowerment Act.

“It simply means that the [preferential procurement] regulations cannot be used as a basis to set such qualification criteria.”

The commission said the invalidity of the regulations of 2017 did not invalidate the B-BBEE Act, and the regulations were not issued under the B-BBEE Act.

It said the act, and how it was applied, was clear and not affected by the ruling of the SCA.

The commission said in terms of a section in the act, all organs of state must apply relevant codes of good practice issued by the minister of trade and industry in, among others, developing a preferential procurement policy.

“Section 10(1) of the B-BBEE Act is therefore mandatory and not optional for organs of state and public entities.”

The commission said the minister had approved and issued 11 codes of good practice that were approved for all sectors that did not have a specific sector code.

It said these codes of good practice had set targets for black ownership and other elements which must be applied by organs of state and public entities for procurement and other economic activities.

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