New Treasury rules promote BEE

Cape Town - The Treasury on Thursday released new preferential procurement regulations meant to promote black economic empowerment and ensure the state sources a maximum of supplies and services from local companies.

The reform extends preferential procurement rules to major public entities like Eskom, Transnet, the Development Bank of South Africa, the CCMA and all their subsidiaries.

The new regulations will also apply to all national and provincial government business enterprises, ranging from Khula Enterprises to regional water boards and development zones.

These entities were previously excluded from the guidelines, which Treasury said would take effect on December 7, to give companies "time to become BEE rated" and officials time to learn to apply the new schedule.

The regulations introduce a scoring scale according to the bidder's BEE status level. Once they come into effect all bidders for state tenders will be required to submit BEE rating certificates.

Finance Minister Pravin Gordhan said earlier the measures were in line with the Industrial Policy Action plan, by taking account of local content when awarding tenders and encouraging the development of small enterprises.

The threshold for the less onerous scoring system for tenders has been raised from R500 000 to a million rand.

In designated sectors, state sectors can stipulate when inviting tenders that only bids with a certain threshold of local content will be considered.

Treasury has also taken aim at the practice of "fronting" fraud.

Section 11 of the regulations state that the tenderer may not be awarded points for his BEE status level if he states that he intends to sub-contract more than 25% of the value of the contract to another enterprise that does not have the same status level.

Successful bidders will also not be allowed to sub-contract in such a manner that the local content of the contract drops below a minimum threshold.

The regulations compel any state body that discovers that the BEE status level has been "claimed or obtained on a fraudulent basis" to act against the tenderer.