Policymakers take ‘preferential’ out of public procurement

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DUDU RAMELA: National Treasury in April published the draft General Public Procurement Regulations 2026 as well as draft Public Procurement Tribunal Regulations 2026 for public comment. Under the draft General Public Procurement Regulations companies that wish to do business with the government must demonstrate that a large percentage of their prior procurement was with majority black-owned businesses, among other measures.

Public procurement in the country accounts for an estimated R1 trillion annually.

We will take a look at what this will mean with African Procurement Law Unit Professor Geo Quinot. Thank you very much, Prof, for your time this evening.

Maybe let’s start with this. How do we understand these developments with the development, if you will, of the Transformation Fund by the Department of Trade, Industry and Competition [dtic], because speculation is rife that it will replace BEE [black economic empowerment]. So how do you understand this?

GEO QUINOT: Good evening, Dudu, and thank you for the opportunity.

Yes, this is of course all part of a broader framework of government in terms of wealth redistribution and black economic empowerment.

Now, what is interesting about the developments in procurement is that we are seeing a departure from the previous regime that really relied very heavily on the existing broad-based black economic empowerment [B-BBEE] regime.

So even though there are some hints of the existing BEE regime in these new regulations, they are very slight, and these regulations are now basically going in their own direction in terms of what entities will look at when they reserve contracts for certain suppliers and how that would play out.

Now we need to of course, as you said, understand it in relation to broader developments. Should it be that the broad-based black economic empowerment regime is on its way out, it does raise some serious questions about operationalisation of these regulations because they do still depend in important respects on that status under the BEE scheme.

So it’s an interesting kind of dual development. The one cannot really exist without the other. But at the same time, some clear signals [are] that we are no longer really following the existing broad-based economic empowerment policy direction.

DUDU RAMELA: In the departure from the previous regime that you speak about, where procurement is concerned, what sticks out for you, especially with what is being proposed?

GEO QUINOT: The biggest change is the fact that we’ve now got, for the first time in South Africa, a lawful set-aside regime.

What that means is that, whereas before – and currently still – we only have a preferential regime.

So that means anyone can participate. Anyone can put a bid in. But when we adjudicate we will give those that have a high rating in terms of a preferential approach additional points, if you like. So they get a margin of preference, and then it’s easier for them to win the contract.

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In the new regime we’re not doing that. We are not giving preference. We are simply saying ‘If you do not meet the following requirements you cannot even compete in the competition’.

So it’s an upfront filter, which of course is a much stricter, harder approach, really forcing entities that apply to the state to comply upfront.

You can’t roll the dice and say ‘Okay, my competitors are not better than I am in this particular policy objective, so I’m just going to take the chance’.

Something we’ve struggled with a lot in some sectors is that under the current regime, given that price constitutes 80% or 90% depending on the value of the contract of that competition, if you’re really an incumbent, a really entrenched supplier, you can just out-price your competition.

So you don’t do any of those. You just outprice.

Under the new regime that will not be possible any more.

I think that’s a major shift in how we think about using procurement for wealth-redistribution purposes.

DUDU RAMELA: Another transformation mechanism is in contracts of over R100 million. What do we need to know about those?

GEO QUINOT: These are the really big contracts, priced above R100 million in value. Here there will, going forward, be a mandatory subcontracting regime.

It means that if you are the winning bidder for such a big contract, you will be obliged to subcontract a certain percentage of that contract, which may not be less than 25% – so 25% or higher – to certain categories of subcontractors.

Those subcontractors must then meet what today we would call ‘preferential criteria’ or ‘designated groups’. Those are defined in the statute. And this becomes a contractual obligation for you.

So even if you then do win that big contract above R100 million, it’s not just for your own benefit that you’re getting it. You are then automatically obliged to bring designated subcontractors into the fold to help you perform under that contract.

DUDU RAMELA: The regulations are said to bring significant improvements to the transparency of the tender system, allowing everyone to see who won a tender, what they charged, and to monitor a tender as it moved through the system.

Do you believe overall some of these proposed changes will actually make things better for officials and auditors, like the Auditor-General, for instance?

GEO QUINOT: Well, one hopes so.

I think the proposals on the table are, from an auditing perspective, a double-edged sword.

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On the one hand the transparency arrangements that you’re referring to should help us a lot in terms of raising the integrity of the system.

It’s well known worldwide that the more transparency you give to your procurement system – exactly as you said; you need to know everything from day one: who submitted the tender, how it was adjudicated, who was awarded, who then performed, who was paid, et cetera – we know that that raises the integrity of the system significantly.

So that’s a big plus.

And if we’ve got systems that are quite sophisticated in capturing that data, of course for an auditor it becomes much easier to track the money flow and to certify that what was done was regular in terms of the system. So that’s the plus.

The negative, however, is that the increased layer around these set-aside mechanisms that we are getting – where there is now a quite complex set of criteria which every single entity will have to adjudicate in order to determine whether a bidder even qualifies – will have to be audited. And that can be a very difficult exercise to do.

That’s going to raise, I think, the difficulty in the complexity of oversight, including for auditors under the new regime.

DUDU RAMELA: The word ‘complexity’ sparks off something in my mind, because Treasury is noting that this is going to be quite robust – for lack of a prettier word.

The final date for submission for comments is the 15th of June this year … what is your submission?

GEO QUINOT: Well, there are lots and lots of detailed points to be made in all of this, so I’ll be going with a fine-toothed comb through all of it to make quite technical submissions on what I think can work and cannot work.

I think the important point here is to note that these rules have been long coming.

We desperately need a new, more modern procurement system in our country. The act, the regulations may not be perfect, but I certainly think on the whole they’re better than we have at the moment.

So I do think this is an improvement.

And I think at this stage it’s a matter of kind of tweaking and polishing specific aspects. But by and large, I think what we are now seeing on the table would result in a much more mature, sophisticated procurement system than we have at the moment.

So I’m certainly not going to say to Treasury ‘No, don’t, don’t do this at all’.

I will just be saying ‘Look, I think here we need to tweak; there we need to polish’.

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But overall, I think this is a good proposal on the table.

DUDU RAMELA: Prof, there has also been a submission by some sectors of society that when you take a look at procurement in South Africa, that particular department, in various government departments you’ll find that it is a job that nobody wants. If you didn’t do so well in this one particular unit, they’ll take you to procurement. So anybody can do it. You’ll find that even somebody like a Dudu, for instance, will be taken to procurement because you need to get something that you can do.

So that is why we find what the Auditor-General then unearths, in terms of the problems that we face in this country with wasteful and fruitless expenditure. Is there something that we really need to look at high up there?

GEO QUINOT: Absolutely, absolutely. You are spot on.

That is the heart of the problem. Until we get to a point where we really professionalise our supply-chain management function in the public sector we are not going to move forward.

We can write beautiful laws and create wonderful systems, but at the end of the day they need to be implemented by human beings who are going to work on the ground across the country.

And unless those human beings have the capacity, the competence – and that’s the necessary skills training – but also the standing within their organisations to effectively put all of this in place, we are really just wasting our time.

That is professionalisation – and with that I mean the training, the competency.

But then also you need to belong to a body that’s going to hold you to account, like we have in all professions. Unless we do that, I don’t think we will really see the kind of improvements that we desperately need.

So hopefully, by having this completely new public procurement regime, we will in the country as a society also now realise that this is not as before, as you very accurately describe.

This is not that kind of office-in-the-basement where you are sending the difficult colleagues that you don’t want to work with in any other unit. We should get away from that.

This is really a strategic function of any public entity, and it should be headed by an executive.

There should be a dedicated executive right there at the top who takes responsibility for all of this, and then from there downwards into the officials.

I would suggest that is probably the single biggest and most important administrative step that we need to take if we are serious about fixing our procurement system.

DUDU RAMELA: Thank you, Prof, for your contribution. Stellenbosch University professor and director of the African Procurement Law Unit, Geo Quinet.

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