Unfortunately, this will be no April Fool
On 1st April this year, new Preferential Procurement Regulations will come into operation. One of their key provisions is to raise the ceiling for racial preferencing in the award of tenders from R1 million to R50 million. This means that up to 20 points out of 100 in the award of tenders by organs of state can take race into account, the other 80 points being awarded for price.
Even though the National Treasury, which gazetted the regulations earlier this year, may opt not to award the tender at all if the applicant cannot provide a "market-related price", the astronomical elevation of the ceiling represents a defeat for its attempts to rein in public spending. It is also a reminder that racial preferencing continues to be one of the defining components of the "radical economic transformation" whose meaning more than one political commentator is busy trying to figure out.
The April Fools' Day regulations also empower organs of state to decree that companies tendering for contracts worth more than R30 million must subcontract at least 30% of their value to small firms that are at least 51% black owned. Organs of state are further empowered to set "pre-qualification criteria" for tenders above this amount.
Such criteria may include a minimum black economic empowerment status. This opens the way for all organs of state to follow Eskom's lead in requiring 51% (or more) black ownership. The recent "voluntary" deal that seven listed construction companies signed with the government shows that they are positioning themselves accordingly.
Current expenditure by national and provincial government on goods and services is budgeted at R222 billion for the 2017/2018 financial year. Add in local government and 715 state-owned entities, and total current spending will probably be double that. Public sector infrastructural spending over the next three years is budgeted at R947 billion.