Eskom probably regards themselves as the saviour of black business and on paper you might even be able to agree with them. There is little doubt that Eskadaat 6's intentions were to promote black business but not specifically to the detriment of non-black business. However the practical application of Eskadaat 6 was a huge threat to legitimate white-owned businesses who employed numerous people. The procurement department's interpretation of Eskadaat 6 had the effect of side-lining these businesses because they were not black owned, something that the Eskadaat itself never intended.
Eskadaat 6 is behind us but the practice of set-asides is not. Eskom's latest BEE policies, specifically Implementation of Eskom's Black Economic Empowerment Strategy (32-416), have very clear set-asides built within them. This diagram explains it all
In other words Eskom (and subsidiaries) will prioritise black disabled EMEs and if it can't get what it needs from them then it'll go down the level until eventually they can source what they want.
I was told by a person who knows these things that Eskom is contractually bound to the government to stimulate and promote black business. This is a very noble and honourable thing and would not be open to question if it was not poorly implemented and was in fact legal.
Legality
Why not legal you may ask. Simple; Eskom is subject to the PPPFA. The PPPFA is Treasury's responsibility and Treasury has outlawed set-asides. This will require a lot more explanation.
The now current PPPFA regulations which came into effect today states in paragraph 2 that
Application
2.(1) These regulations apply to organs of state as contemplated in section 1 (iii) of the Act and all public entities listed in schedules 2, 3A, 3B, 3C and 3D to the Public Finance Management Act, 1999, Act No. 1 of 1999,
(as amended by Act 29 of 1999) and municipal entities.
For the purposes of clarity, schedule 2 of the PFMA lists the following (go to page 71)
Schedule 2 - MAJOR PUBLIC ENTITIES
1. Air Traffic and Navigation Services Company Limited
2. Airports Company of South Africa Limited
3. Alexkor Limited
4. Armaments Corporation of South Africa Limited
5. Broadband Infrastructure Company (Pty) Ltd
6. CEF (Pty) Ltd
7. DENEL (Pty) Ltd
8. Development Bank of Southern Africa
9. ESKOM (my emphasis)
10. Independent Development Trust
11. Industrial Development Corporation of South Africa Limited
12. Land and Agricultural Development Bank of South Africa
13. South African Airways (Pty) Limited
14. South African Broadcasting Corporation Limited
15. South African Express (Pty) Limited
16. South African Forestry Company Limited
17. South African Nuclear Energy Corporation Limited
18. South African Post Office Limited
19. Telkom SA Limited
20. Trans-Caledon Tunnel Authority
21. Transnet Limited
All subsidiaries of the above major public entities
It's therefore very clear that Eskom et al are subject to the PPPFA. The legality of Eskom's set-aside policy is questioned by Treasury Practice Note Practice Note SCM 2 of 2006. I've written quite a lot about this before. The practice note states in paragraph 1.1.5 that
The preferences contemplated in the constitution and PPPFA provide for the protection or advancement of categories of persons, disadvantaged by unfair discrimination without prohibiting any category of bidders from bidding for government contracts.
This note is preceded by
"the practice note is applicable to all national and provincial departments, constitutional institutions and public entities as defined in schedule 3A and 3C of the PFMA."
Would Eskom then argue that they have a binding contract between themselves and government and this overrides the Constitution (specifically section 217 which gives the PPPFA its legitimacy)? Any lawyer will tell you that this isn't possible.
What now?
There is little doubt that large sections of 32-146 and other Eskom supply chain policies are unconstitutional and hence illegal. But this has never stopped Eskom from continuing with this practice. My thinking is that the press should chase up on this story. Its relevance is significant especially on the day that the PPPFA regulations come into effect.
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