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Procurement

Government is backing its promise of delivering a successful FIFA World Cup^TM with a R17.4 billion investment in infrastructure development. To maximize the impact of this public spending, procurement for 2010 will be conducted in a way that furthers black economic empowerment and strengthens small, medium and micro enterprises (SMMEs).

Background to black economic empowerment

The black economic empowerment strategy is a government intervention to tackle the legacy of apartheid's systematic exclusion of the majority of South Africans from full participation in the economy.

The starting point for this strategy – formally known as broad-based black economic empowerment, or BBBEE – is that the country requires an economy that can meet the needs of all its people in a sustainable manner. This implies an economy that builds on the full potential of all persons and communities across South Africa’s length and breadth.

This, of course, is exactly what apartheid prevented. For decades, the majority of South Africans were purposefully restricted from meaningful participation in the economy, while the creation of wealth was confined to a racial minority and underdevelopment was imposed on black communities.

The period since 1994, when the first democratic government was elected, has seen the South African economy undergo profound restructuring. Despite the successes of the past decade (such as ten years of consistent growth and the broadening of access to social services), overcoming the legacy of inequalities will still take years.

In a nutshell, the BBBEE strategy involves making sure government procurement supports black economic empowerment and SMME’s as well as interventions to promote such procurement practices in the private sector, including:

• an Act that allows for the formalisation of guidelines and codes, and the establishment of an advisory council.
• the formalisation of partnerships and charters with the private sector, which set targets
• the use of a “balanced scorecard” approach for gauging progress

Legislation has been introduced to back up this strategy.

The Preferential Procurement Policy Framework Act 5 of 2000, had its roots in a 1997 Green Paper on public sector procurement reform. This policy document recognised that the Government, as the largest buyer of goods and services in the economy, had the responsibility to use its purchasing power to support BBBEE, small enterprises and labour-intensive construction. To give effect to a preferential procurement policy:

• The tendering process was made more accessible to black people.
• Tenders were “unbundled” into smaller tenders to allow smaller enterprises to bid for work.
• A point system was introduced to award tenders on the basis of the combination of price and preference for targeted groups.

The National Small Business Act 102 of 1996 (amended 2003) was introduced to provide an enabling environment for SMMEs and to establish institutions to provide support to entrepreneurs. These institutions, Khula and Ntsika, have aimed a substantial proportion of their programmes at black entrepreneurs.

Procurement for 2010

Procurement by the state for 2010

State procurement for the World Cup will follow the standard practices of BBBEE and SMME promotion. The Government is also making sure that others – the Local Organising Committee, FIFA and its commercial partners – procure services according to empowerment policy.

Government declared the 2010 tournament a protected event, on the condition that the Organising Committee will make opportunities available for South African businesses – in particular, for those from previously disadvantaged communities.

The Organising Committee has agreed to procure 30% of the products and services it needs from small businesses and BEE companies. Seventy percent of the procurement allocated to BEE companies and small businesses must be allocated to smaller black enterprises – especially to co-operatives with a large number of female members, and small businesses of which women are key stakeholders.

The Department of Trade and Industry will ensure that the Organising Committee complies with BEE codes in tendering processes. The Government and the Organising Committee will also organise roadshows on the business opportunities arising from the tournament deliverables, such as transport and stadiums, particularly in the nine host cities but also further afield.

Procurement by others for 2010

The chief merchandiser of FIFA will be issuing licences for FIFA marketing rights, and the Department of Trade and Industry is consulting FIFA on incorporating the principles enshrined in BEE and public-sector procurement.

FIFA has also indicated that its trading partners have been informed that the laws of the country in which the World Cup is hosted must be adhered to.

A further element of government’s economic benefit strategy for 2010 centres on licences for liquor distribution and consumption. The Department of Trade and Industry will engage with the chairpersons of boards that issue liquor licences, with FIFA and with the FIFA-nominated official supplier of liquor to the World Cup, Budweiser, to harmonise their procurement practices with BEE and public-procurement principles.

The Department of Trade and Industry will also consult stakeholders from the National Liquor Authority, the National Liquor Regulator’s Forum and the Policy Council to bring wider benefits to South African businesses.

Proudly South African

The Proudly South African campaign, which encourages people to buy locally made products, is to be a core element of procurement practices in the run-up to 2010.

Proudly South African is a partnership between the Government (led by the Department of Trade and Industry) business, labour and community groups, under the auspices of the National Economic Development and Labour Council.

The Proudly South African logo can be displayed on many products that use 50% or more of local content, comply with labour legislation and meet high standards of quality. Extension of this campaign ahead of 2010 will have lasting benefits for South African products and the economy as a whole.