B-BBEE Procurement, Transformation and Verification >>
B-BBEE Procurement, Transformation and Verification
B-BBEE Procument Transformation
Section 217 of the Constitution of the Republic of
South Africa states that when an organ of state in the
national, provincial or local sphere of
government, or any other institution identified
in national legislation, contracts for goods or
services, it must do so in accordance with a
system which is fair, equitable, transparent,
competitive and cost-effective. Furthermore, it stipulates the need to
implement a procurement policy that will provide
for categories of preference in the allocation
of contracts; and the protection or advancement
of persons, or categories of persons disadvantaged by unfair discrimination.
The Preferential Procurement Policy
Framework Act (PPPFA) was enacted as a result of
the aforementioned Section of the Constitution.
The PPPFA stipulates that when government assesses
contracts, it must take into account a preference
point system which prescribes functionality,
price and reconstruction development programme (RDP)
The preference point system
For contracts below R500 000, 80
points will be allocated for price and
functionality and the remaining 20 points for
RDP goals. For contracts above R500 000, 90
points will be allocated for price and
functionality and 20 points for RDP goals.
In December 2006, when the
B-BBEE Codes of Good Practice were approved for
gazetting, Cabinet directed the dti and
National Treasury to amend the PPPFA, so as to
advance the objectives of the B-BBEE Act and
its related strategy, as these two pieces of legislation were not appropriately aligned.
The abovementioned process led
to the amendment of the Preferential Procurement
Regulations as interim measures to align themselves to the
B-BBEE Codes of Good Practice.
Although the BEE Act does not
place a legal onus on the private sector to comply
with its provisions, it does, however, place a legal onus
on organs of state to contribute to BEE, including among other aspects, when developing and
implementing a preferential procurement policy.
In addition to achieving the 20
points allocated to the preferential procurement element of the Codes of Good Practice,
government entities must procure goods and services from companies
with a good BEE status. This has a trickle-down
effect which applies pressure on all suppliers
and service providers to meet these standards. The impact that this
cascading implementation has on procurement in general is the increase in market access for
The (interim measures) draft
regulations proposed the 80/20 preference point
system for the procurement of goods and services with a rand value of R1 million,
and a 90/10 preference
point system for the procurement of goods and services with a rand value of above R1 million,
to strengthen the contribution of small, medium and micro-sized enterprises (SMMEs).
Furthermore, the draft proposed
the allocation of point systems on the following
With regard to the 80/20 principle, 20 points
are allocated to a bidder in respect of its B-BBEE
status level, as contemplated in the draft. Further, with regard to the 90/10 principle,
10 points are allocated in respect of the bidder's B-BBEE status level.
In addition, the draft
Regulations recommend how to address the
objectives of the Industrial Policy Action Plan, especially those aimed at promoting the
procurement of domestically-produced goods and
services. The draft Regulations stipulate that
the dti is able to designate specific industries of
critical and/or strategic importance, for tenders in which it is indicated that
only locally-manufactured products with a prescribed minimum
threshold for local content will be considered.
Where the dti is yet to
designate an industry on organ of state, it may, as a
specific tendering condition, prescribe the
minimum local content of a product based on
thorough research that includes strategic
sourcing methodologies, ongoing industry
analysis and local manufacturing capacity. In
such cases, a two-stage bidding process may be
The BEE Verification process
evolved since the release of the B-BBEE Strategy
in 2003 and the promulgation of the Broad-based
BEE Act, which set the scene for the regulation
of the BEE measurement/verification industry.
The gazetting of the B-BBEE Codes firmly moved
the industry from a self-regulated one to a
BEE verification industry.
the dti appointed the
South African National Accreditation System (SANAS)
to conduct the accreditation of Verification
Standards of the B-BBEE
The role of B-BBEE Verification
Agencies is to assess, verify and validate
disclosed and undisclosed B-BBEE-related
information on measured entities. The standards
for performing B-BBEE measurement are
fundamental to confirming that the
information on which the certificate is based,
has been tested for validity and accuracy.
B-BBEE Verification should, therefore, be based on
key measurement principles and standards. The
methodologies followed by Verification Agencies,
in the performance of verification, should
demonstrate a clear understanding and knowledge
of the B-BBEE Framework and Codes of Good Practice.
In view of the above, the dti,
published the Verification Manual, Gazette No.
810, on 18 July 2008, with the intention of
putting in place universal, transparent and
coherent standards applicable to the
verification industry. The Verification Manual
prescribes minimum standards and methodologies
that Verification Agencies should apply
when conducting B-BBEE verification. To qualify
for accreditation, Verification Agencies should conform to, among
other pre-requisites, the minimum requirements of the
Verification Manual and ensure that the necessary standards are
maintained and upheld even beyond accreditation.
B-BBEE Verification Certificates
In the interest of harmonising accreditation
and verifications practices, the dti has
put in place a process of phasing out
certificates issued by non-accredited
Verification Agencies. A phase-out approach was
favoured, to ensure that further uncertainty was
not perpetuated by a sudden withdrawal of
non-accredited Verification Agencies from the market.
Consequently, as from 1 February
2010, only certificates issued by Verification Agencies that are
accredited, or Agencies that are not yet accredited
but which have received a valid pre-assessment letter
from SANAS, will be accepted in the market.
These certificates will be valid for a period of
twelve (12) months. The Minister of Trade and
Industry issued a Government Gazette Notice, No. 354 of 2009 to this effect.