DARYL SWANEPOEL | No, not all government contracts below R20m will be reserved for black-owned businesses

The proposed new public procurement regulations have generated considerable controversy, but one of the most prominent claims being made about them is not correct. Contrary to an impression created in parts of the public debate, the regulations do not provide that all government contracts worth R20m or less will henceforth be reserved exclusively for 100% black-owned businesses.

This distinction matters. Preferential procurement remains one of the most contested areas of public policy, and the proposed regulations contain provisions that warrant serious scrutiny. But legitimate criticism is weakened when it rests on an inaccurate description of what the government is proposing. There is enough in the regulations to debate without exaggerating their reach.

The Constitutional Court recently declared the Public Procurement Act unconstitutional and invalid because parliament failed to facilitate meaningful public participation in its passage. Importantly, the court’s ruling concerned the legislative process, not the substantive merits of the procurement framework.

The policy choices embodied in the act may therefore return in replacement legislation after a constitutionally compliant process. The proposed set-aside system consequently remains a live policy issue, and one that should be scrutinised before, rather than after, it is enacted again.

The policy framework contained in the invalidated act and its accompanying draft general public procurement regulations envisage a system of set-asides for designated categories. Black people are among those categories, but the legislation also separately identifies black women, women, black people with disabilities, people with disabilities and military veterans.

It provides further categories for various small enterprises, including those owned by black people, women, people with disabilities and youth, as well as small enterprises generally, co-operatives and certain geographically defined categories.

The significance is easily overlooked. A white woman may qualify under a set-aside for women. A white person with a disability may qualify under the category for people with disabilities. A qualifying small enterprise owned by white youth may potentially qualify under a youth-owned small-enterprise set-aside, while a white-owned small enterprise may fall within the general small-enterprise category. Race is unquestionably an important element of the proposed system, but it is not its sole organising principle.

The R20m threshold must be understood within this broader framework. The draft regulations require procuring institutions to identify up to five designated categories, having regard to their strategic mandates, relevant sectors or supply markets and the availability of potential suppliers. Where the prescribed conditions are met, a contract, or a specifically unbundled portion of one, with an estimated value not exceeding R20m, may be subjected to a set-aside. There must also be at least three potentially qualifying suppliers in the identified category.

In other words, R20m is the upper threshold at which the set-aside mechanism may operate.