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IRR concerned over new BEE regulations

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The Institute of Race Relations (IRR) has expressed concerns that new regulations published by government last week pertaining to Black Economic Empowerment (BEE), may promote corruption within the public sector tendering processes.

Under existing regulations within the Preferential Procurement Policy Framework Act of 2000, which relate to dealings with organs of state, tenders work through a system based on 100 points. Of this, 90 are based on price and functionality, and the remaining 10 on BEE status. In practice, this means that a BEE bidder is allowed to charge 10% more on their services, and still qualify on tenders that exceed R1 million.

And according to IRR head of policy research, Dr. Anthea Jeffery, those existing frameworks have led to a great deal of price inflation. Should the new regulations come into effect, she said price and functionality would now count for a lesser 50 points, with BEE taking up the remaining 50. This would allow BEE bidders to inflate prices by up to 50%.

“With that kind of price inflation happening, obviously there is then less revenue available to fund goods and services in other spheres,” she highlighted.

These concerns have not been exclusive to the IRR however. ANC secretary general, Gwede Mantashe has previously voiced concern at how much preferential procurement has cost the state. Jeffery added voice to this by acknowledging that the current BEE requirements were not reaching or benefiting the majority of South Africans, but rather a ‘narrow elite’.

“With this new approach we will see a small group of BEE ‘tenderpreneurs’ who benefit greatly, whilst the poor pay the price in much worse goods and services, and much fewer goods and services,” she said.

Jeffery further suggested that to bring about true upliftment of the poor and those previously disadvantaged, there needed to be a shift away from BEE towards a system the IRR called ‘Economic Empowerment for the Disadvantaged (EED)’. The emphasis of this would be on economic growth, with EED points given to businesses that invest in the country be it through infrastructure, business expansion, or investment in the youth.

“We would also give businesses EED points for either sustaining the jobs that they have, or much better still for expanding employment or offering more jobs,” she added.

Whilst the idea could potentially prove beneficial to the country in the long run, she said they were expecting much resistance from those with a vested interest in the new BEE rules. VOC (Mubeen Banderker)

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