Gordhan's Treasury licenses extravagance in new charter for fronting "traitors"
At a time when Finance Minister Pravin Gordhan has promised to shrink the budget deficit, the National Treasury's chief procurement officer is processing "preferential procurement regulations" that will license hefty increases in government procurement expenditure. While Mr Gordhan is also supposedly committed to restraining public sector pay rises, the new regulations loosen the constraints on procurement expenditure by all organs of state.
The most important component of the proposed new regulations is that the ceiling below which tenders are permitted to have a 20% loading for Black Economic Empowerment (BEE) status will rise from R1 million to R100 million. This means that a company with BEE status can put in a tender costing 20% more than companies without such status, and still win the contract. For contracts worth more than R100 million, they can load the price by 10% and still beat non-BEE companies.
The tenders apply to spending on infrastructure as well as other state expenditure. The government spends almost R200 billion a year on goods and services, while the public sector infrastructure budget amounts to nearly R275 billion a year. There are mouth-watering opportunities here for black companies. The additional expenditure authorised by the BEE loading will run into billions of rands.
The regulations were published on 14th June, and the treasury is now processing public comment on them that was invited for a deadline of 15th July.
Two years ago the Black Business Council complained that the government had failed to use the state's "massive buying power" to "create" black industrialists. The new regulations are a major effort to meet that demand.