President Jacob Zuma has promised to take steps to ensure that more black South Africans are economically empowered, but he cautions that people should also work harder to to achieve their business and financial goals. Speaking to the Black Business Council, which has signalled strong support for Zuma, South Africa’s president said that the Preferential Procurement Policy Framework Act will be changed “to continue the quest for a transformed economy”. More people must be brought into the net to benefit from government contracts, he said. Zuma would like also like to see more black people in senior positions in companies, as executives and senior managers. Zuma is convinced that investors are in favour of Black Economic Empowerment (BEE) because it creates certainty. The president’s words will be music to the ears of the tenderpreneur brigade, though not so sweet to the small army of entrepreneurs who aren’t black but play a meaningful role in job creation and economic growth and are already doing their bit for BEE. An amended public procurement bill is set to be released for discussion next month and tabled in Parliament early next year. – Jackie Cameron.
By Lameez Omarjee
Johannesburg – The Preferential Procurement Policy Framework Act (PPPFA) has not yielded the transformation results it was set to achieve, and given the shortcomings of the act, it will be repealed, said President Jacob Zuma.
Zuma delivered an address at the Black Business Council (BBC) Gala Dinner at the Hilton Hotel in Sandton on Tuesday night. He discussed the importance of continuing to strive for transformation for the purposes of economic freedom. Among other issues, he mentioned new initiatives and changes to the PPPFA to continue the quest for a transformed economy.
“We thought it (PPPFA) would work and make an impact. But you (BBC) pointed out it does not work. We are aware of the shortcomings… It is rigid and not responsive to government objectives,” he said.
Zuma said a “flexible” preferential procurement programme would be introduced, that is responsive to government objectives.
The current PPPFA has failed to substantiate the “skewed” ownership and controlled South African economy, he explained.
The amended public procurement bill is scheduled to be tabled in parliament in early 2017, he said. To make the PPPFA responsive to transformation imperatives, a new regulation is being proposed to have a compulsory subcontracting clause. “It will be compulsory to subcontract 30% of the value of a contract, for all contracts above R30m,” he said.
The intention is to finalise the regulations for approval by October 2016 and it is to be made public by 1 November 2016.
Recently the BBC came under fire for supporting the president by declaring publicly that the association wanted Zuma to complete his term, despite calls by businessman Sipho Pityana to have Zuma removed.
The BBC told Fin24, that the decision to remove Zuma would be up to the ANC.
Economic freedom a work in progress
Zuma also said that although political freedom has been achieved, economic freedom is still a work in progress. He added that the majority of citizens should start playing a meaningful role in the economy, not only participating as workers but as executives, senior managers and policy makers.
“In China, the Chinese are in control of the economy. In India, the Indians are in control of the economy… The case in South Africa is not the same,” he said. What sets these countries apart is the “iron discipline” to work hard. He said that the lack of discipline among South Africans is what counts us down.
Further, Zuma said that the black empowerment policy was developed to remove the historical and current impediments that inhibit the black majority from participating and benefitting from the activities of the economy.
Zuma added that the investor community was supportive of black empowerment policies. “Most investors only want certainty and clarity. They want to know how the policy works and what is expected from them. They are not opposed to reversing the legacy of the apartheid past.”
The country will only succeed if both the public and private sector “institutionalise” these policies and implement them. “The private sector is expected to share and transfer economic ownership and control, skills and capabilities to black people,” he said.
As for the role of the public sector, government must use its “procurement muscle” to sustain and grow black business, he said. Annually, through the public sector procurement system, government spends R500bn on goods and services and construction works.
Address by President Jacob Zuma at the Black Business Council Awards Gala Dinner
The President of the Black Business Council, Dr Danisa Baloyi and the leadership as a whole, Former Presidents of the Black Business Council, Mr Patrice Motsepe and Mr Ndaba Ntsele
Honourable Ministers Lindiwe Zulu, Malusi Gigaba and Nathi Mthethwa
ANC Treasurer General Dr Zweli Mkhize,
Black Business Council Chief Executive Officer, Mr Mohale Ralebitso and all business executives present,
Captains of Industry
Representatives of NEDLAC
Ladies and gentlemen
Good evening to you all.
Thank you for inviting me to join this important gathering of black business.
The Black Business Council has an important role to play in championing economic transformation in our country.
You have a responsibility to work with the democratic state to ensure that the objectives that guided our struggle for liberation are met.
'Black economic empowerment has failed': Piketty on South African inequality https://t.co/Pl5XqcTTVJ
— Sharon McLennan (@145218DevIneq) September 20, 2016
This evening you have decided to honour trailblazers and outstanding black leaders who have played a prominent role in opening up the space for black people to enter the business arena.
In this way, you have reminded us of the progress that has been made against all odds, by black entrepreneurs.
You also remind us that the struggle continues. Political freedom has been achieved, but economic freedom remains work in progress.
For any economy to succeed, the majority of the citizens must play a meaningful role, beyond being workers. They must participate also as owners, executives and senior managers and also as policy makers in the economy.
Since coming to power in 1994, the ANC government recognised the imperative to de-racialise the ownership and control of the economy.
The guide in this regard is the clarion call in the Freedom Charter that the People Shall Share in the Country’s Wealth!
We are guided by the need to promote inclusive growth and to create decent employment.
We also need to eliminate poverty and deal decisively with extreme inequalities in our society.
To promote economic transformation and inclusive growth, the Broad Based Black Economic Empowerment policy was designed and is being implemented.
The B-BBEE policy was not designed just for government to say it is doing something.
Our black economic empowerment and affirmative action policies must open doors and remove impediments, both historical and current, visible and invisible, which inhibit the Black majority from participating and benefiting from the activities of the economy.
For the country to succeed, both the public and the private sectors need to institutionalize the policy and implement it.
The private sector is expected to share and transfer economic ownership, control and the necessary skills and capabilities to black people.
We are impressed by the cooperation of the international investor community. We have found that most investors only want certainty and clarity. They want to know how the policy works and what is expected from them. They are not opposed to reversing the legacy of the apartheid past.
On the other hand, for the BBBEE policy to succeed in the public sector, government must use its procurement muscle to sustain and grow black businesses.
Annually, through the public sector procurement system, government spends in the region of 500 billion rand on goods and services and construction works alone.
In this regard, the buying power of the state is a powerful economic transformation tool. It can and must be used to advance black economic empowerment.
I've never been so pleased in being corrected when i mentioned "Failed Black Economic Empowerment",
— Cel' Swekire (@Wasanga_Mayhem) September 26, 2016
In the past five years as part of advancing BBBEE procurement, government amended the Preferential Procurement Policy Framework Act or the PPPFA Regulations to provide for BEE preference points.
We thought this would work and would make an impact. However, you pointed out that it does not work.
We are now aware of the shortcomings. We agree that the preference points system prescribed in the PPPFA is rigid and is not responsive to government objectives.
Due to the shortcomings, the preferential procurement regulations have failed to substantially re-shape the skewed ownership and control of the South African economy.
It is the intention of government to ultimately repeal the PPPFA and its associated regulations and introduce a more flexible preferential procurement framework that is responsive to government objectives.
In this regard, the Preferential Procurement Policy Framework Act will be repealed by the Public Procurement Act. The Public Procurement Bill is now going through the different government stakeholder engagement processes before it is tabled in Parliament. This is targeted for early 2017. I trust that the BBC has made its inputs to the National Treasury.
In the interim, government is to produce regulations that will improve the PPPFA to make them more responsive to the economic transformation imperatives.
One of the main changes contained in the proposed new Preferential Procurement Regulations is the introduction of a compulsory sub-contracting clause.
It will be compulsory to sub-contract a minimum of 30% of the value of the contract for all contracts above 30 million rand, to small and emerging enterprises owned by the women, youth, black people or persons with disability.
We have located the implementation of the policy on the 30 percent set aside of the public procurement budget for small business in a workstream led by the Minister of Small Business Development. The BBC may want to focus on specific high-value sectors where it wants to break the prevailing dominance patterns, in taking advantage of the set-asides.
The intention is to finalise the Preferential Procurement Regulations for approval during October 2016, and for these to be promulgated by 1 November 2016.
Government is also reviewing the National Small Business Act. We invite black business to work with the Small Business Department to ensure that the Amendment Bill supports the creation of a thriving environment for small business.
One of the biggest challenges facing black businesses and the implementation of our empowerment policies is access to finance.
To address this challenge we established the National Empowerment Fund (NEF) to be used as an instrument to financially support empowerment initiatives.
Since its inception, the number of approvals by the National Empowerment Fund (NEF) have totalled 7.6 billion rand, supporting seven hundred and seventy (770) black businesses.
For the 2015/16 financial year, the NEF has approved one hundred and twenty deals worth 1.3 billion rand.
The NEF needs to be supported in order for the institution to do more to ensure access to finance by black entrepreneurs. Government is currently exploring various means to recapitalize the NEF as an apex institution to facilitate BEE finance.
I am sure that we are all in agreement that all development finance institutions must be used as vehicles of economic transformation. Within the Public Investment Corporation fold, the Government Employees Pension Fund has allocated a further 70 billion rand, while the Unemployment Insurance Fund increased its allocation to 25 billion rand towards developmental investments.
— Sabelo Myeni (@sabelo_myeni) September 27, 2016
The IDC has provided thirty one billion rand over the past five years to companies that are black-empowered. The IDC has also allocated 23 billion rand to the black industrialist programme, which was established recently.
You will recall that at a Black Business Council conference a few years ago, we discussed that it was not enough for black people to own shares and be passive investors only.
They need to be in the coalface of business, owning factories and playing a key role in manufacturing.
From that discussion, arose the Black Industrialists programme.
In its first year of roll-out, the Department of Trade and Industry has approved 22 Black Industrialist projects with a total value of 1.2 billion rand.
Over 1000 direct jobs have been supported. We thank you for supporting this programme, and we acknowledge the support of big business as well.
Let me also use this opportunity to urge the Black Business Council to join government in campaigning against the practice of fronting.
Fronting undermines black economic empowerment by creating a false sense of achievement.
The newly-established Broad-Based Black Economic Empowerment Commission has to date received one hundred and eighteen (118) complaints, specifically pertaining to fronting.
Investigations are in progress and the B-BBEE Commission will issue reports in due course.
We are doing well in our country currently in promoting cooperation between government and business. This positive collaboration also needs to include the promotion of transformation. It must go beyond reigniting growth and staving off a ratings downgrade.
We will also continue working with labour and the community sector to ensure that the clauses that are in the Freedom Charter are achieved.
Indeed, the struggle for economic inclusion continues in earnest.
With your support, and working together, we will succeed.
I thank you.