DA rejects proposed Public Procurement Bill

Issued by Dr Dion George MP – DA Shadow Minister of Finance
26 Nov 2023 in News

Note to editors: Please find attached soundbite by Dr Dion George MP

The Democratic Alliance (DA) rejects the proposed Public Procurement Bill, another disastrous piece of race-based legislation introduced by a failing ANC government. The Bill, ostensibly aimed at establishing a more comprehensive framework for preferential procurement, fails to address the core issue of systemic corruption plaguing South Africa’s procurement system, entrenches racial divisions and exacerbates inefficient public expenditure. Instead of creating an enabling environment for economic growth, it is poised to deepen economic stagnation and the cost of living crisis by imposing new, restrictive requirements.

Treasury’s new requirements propose five approaches for providing preference:

  • setting aside contracts for business owned by preferred groups.
  • limiting bidders to companies that meet specific criteria, such as BEE ratings/ownership.
  • points for preferred groups that potentially allows a bid to win even if it is three times more expensive than a non-preferred group’s bid.
  • mandating winning bids to sub-contract part of the contract to business owned by preferred groups.
  • designating certain sectors or products exclusively for local manufacturing.

These regulations will cause additional market distortions that that will lead to inefficiencies in the public sector. The emphasis on government intervention and preferential treatment of specified demographic groups are also in contrast to the principle of non-racialism and counterproductive to market principles and the development of a truly competitive business environment.

This is confirmed by the Harvard Growth Hub that recently highlighted preferential procurement as a primary cause of the collapse of state capacity.

Public procurement accounts for a significant portion of government expenditure — nearly a trillion rand and approximately 22% of South Africa’s GDP. It serves as a powerful lever to incentivise government policies across the entire economy and presents an ideal opportunity for government to address dire socio-economic conditions by incentivising companies to engage in behaviours that contribute positively to the goals of national importance.

However, throughout its tenure in government the ANC has implemented a progressively racially divisive public procurement framework that has resulted in harmful negative effects across the entire state. Failed BEE policies facilitated the emergence of tenderpreneurs, entrenched systemic corruption and crowded out economic growth needed to generate jobs and alleviate poverty.

The DA reaffirms our commitment to non-racialism and will continue to strongly oppose the continued usage of crude racial categories in the implementation of preferential procurement policies.

The DA’s Social Impact Bill and broader Economic Justice Policy presents an alternative preferential procurement policy.

Our alternative is focused on the pivotal factors of price and efficiency in government procurement decisions. The Social Impact Bill represents a significant step forward in transforming public procurement for the betterment of South African society. By embracing the social development goals model and prioritising price, efficiency, and the needs of the most vulnerable, we can create a more inclusive and prosperous future for all. The Bill further proposes to scrap BEE considerations and instead incorporate a company’s contribution to a range of sustainable development goals.

Amidst South Africa’s economic slowdown, with growth projections falling from 0.9% to 0.7%, it’s imperative for the government to foster, not hinder, economic growth. By further distorting price signals the proposed legislation will do just that and exacerbate the cost-of-living crisis households are facing.

The only viable solution is a complete overhaul of the current governance that will replace this dysfunctional, incompetent, and corrupt ANC government.

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