State procurement is not the answer

Johannesburg - Business should stop relying too heavily on state procurement, Finance Minister Malusi Gigaba said this week.

He was addressing the Black Business Council (BBC) during an event in Johannesburg this week. The audience consisted of the BBC executive committee as well as some of its most prominent business members.

“The strategic use of state procurement is an important lever to grow black business though not the only one. It is important to note that we cannot and should not think of state procurement as the primary or sole lever to develop black business,” he added.

“We are also looking at how established business also procures privately along their value chains. The state’s R500 billion in annual procurement spend is a substantial amount but still only 13% of the GDP, but it is a critical lever nevertheless as it allows us to lead by example and give resources and experience to emerging business,” Gigaba said.

He added that there are 709 state-owned entities procuring goods and services and, until recently, suppliers had to engage individually while the controversial Preferential Procurement Policy Framework Act (PPPFA) also overemphasised price.

“The PPPFA had also overly prioritised price in evaluating bids to the exclusion of economic development and transformation considerations. The state getting value for money is important but this aim should be considered in conjunction with the economic history and national development imperatives,” he said.

Gigaba called on white business to lead the way in transforming the economy.

“We need white business to champion transformation, to view it as in their commercial interest. We need white business to embrace the transformation project and step forward in all aspects of broad-based black economic empowerment, including employment equity,” Gigaba said, further pointing out that the general assumption that BEE goes hand in hand with corruption needs to come to an end.

“We need to stop talking about BEE and corruption in the same breath. They are not two sides of the same coin. A black person engaging in corruption does not and should not taint the reputation of black people generally. The reputation of white people generally is not tainted by construction collusion scandals, the currency manipulation scandals or any other of the many instances of corruption and fraud that have taken place over the years. Black business must maintain high standards.”

Earlier during the event, BBC president Danisa Baloyi said the country was experiencing an investment strike.

“I will call it what it is. I don’t care any more. There’s an investment strike in this country. We are asking the people sitting on those billions and trillions of our money, because part of it comes from the PIC [Public Investment Corporation], it’s our money, even the ones in the banks – it’s our money. We are pleading that they get out of the investment strike and start investing in our people and the projects because it is wrong in my book for us to be sending you minister to go and call for investors when we are not investing in South Africa,” she said to thundering applause.

She reiterated her previous calls for the PPPFA to be scrapped.

She also pleaded with Gigaba to increase the budget of the small business development department.