Dodging the BBC bullet (PPPFA draft regulations)

It was my father who told me that if you aren't going to say anything nice about anyone or anything then don't bother – but then he had no idea that the ANC government (which he never had any issue with) were going to be so useless. And my god how useless they have turned out to be. If you are in the only competent department in this bloated government (public sector) and you have been told by lobby groups like the BBC, BMF, Black Lepers' Association etc that you WILL make a plan to change the PPPFA to suit them, eventually you will capitulate. And this is exactly what Treasury has done with their new draft PPPFA regulations.

We need to travel back in time here. The black business council has long been pushing for dramatic changes to the PPPFA – the current (not draft) regulations really throw a spanner in the works for state capture (legitimate state capture – not the illegitimate stuff which makes up the majority of state procurement). Our brazenly Hlaudi-like jungle jim had even gone so far as to demand (always demands for jungle because he lacks the credibility everywhere for anyone to constructively engage with him) that the PPPFA be scrapped. Perhaps the BBC was emboldened by Zuma's statement in the fated 2015 state of the nation farce where set asides would be created for black businesses, perhaps they were inspired by Dud Miyeni-millions-to-be-had's set asides at the national disaster of the skies. Perhaps they forgot to pay attention to the fact that Treasury told Dud to stop behaving in this arbitrary way. Maybe they saw that if you put pressure on Treasury and ran to Daddy (23 odd children that we know about) you'd get the finance minister fired. Or maybe the Treasury just wanted to get this irritating mosquito out of their offices. Whatever the rationale – Treasury has published a half decent document (no sign of Bolshie Bob's work to be seen in it, which automatically makes it better).

A few observations

1. It's open to interpretation and changes. They've used general descriptions in many cases, things like referring to any EME/QSE as defined in a code of good practice issued under section 9(1) of the Act
2. The old HDSA definition in the first regulations is back – they don't refer to people who couldn't vote before 1994 but have included all women and disabled people in the designated group category
3. Functionality is now part of the evaluation criteria. In the past the PPPFA kicked in only once the functionality test had been conducted.
4. The terms "rural areas" and "township" are also included within the definitions
5. The 80/20 principle is now extended to contracts less than R100million (this is just for the BBC – they are going to make a clean sweep here)
6. Set-asides are included but not expressly – they are suggested. For example, paragraph 10 (1) says that pre-qualifying criteria MAY include things like (inter alia) a stipulated minimum BEE level.
7. If the contract is more than R30million then 30% MUST be subcontracted to a prescribed class of subcontractor.

Now what I really think

R100million as an 80/20 threshold.

I don't know – this is up 100% from the current regulations, which have set the threshold at R1million. This is a large amount of money. This figure is there to appease the lobby groups who will take firm advantage of this (I would too). What Pravin is telling us is that he is willing to pay up to R25million more on a contract.

BUT – Treasury is not as dumb as the ANC. There are implications here

• Paragraph 6.4 of Statement 000 in the Revised Codes (36928 – if my brackets irritate you, you aren't alone) says that start-up enterprises must produce a QSE scorecard for contracts between R10m and R50m and a generic one for larger amounts for any contract contemplated under section 10 of the BEE Act. This effectively messes with compliance simplicity for contracts over R50m for start-ups.
• Any contract over R30m must sub-contract. This might not be stipulated in the tender document, but the tender has to make it clear who they are subcontracting to (white owned EMEs and QSEs may also be subcontracted).
• There is a functionality requirement which COULD provide a filtering mechanism for start-up chancers.

And the issues

1. Contracts less than R50m are open to abuse from start-up black-owned companies. No this is not racist – it's just that black-owned companies of between 51% and 100% ownership don't need to comply with elements, they just need an affidavit. State capture in R50million chunks – the Guptas must be laughing in the Dubai heat. Don't laugh too much my little pilferers – you could lose hydration in that heat and you won't be able to stand trial here with Zoomer.
2. The functionality criteria are not obligatory. A corrupt supply chain manager may just exclude this because they have already identified the winners in the tender

The inclusion of examples in the document

Paragraph 10 of the draft regulations list a few types of examples that will inevitably become the norm. The paragraph below is edited.

10(1) If an organ of state intends to apply pre-qualifying criteria in the evaluation of a tender, the criteria stated in the tender documents may include, but are not limited to

1. The tenderer having a stipulated minimum B-BBEE status level of contributor
2. The tenderer to sub-contract at a minimum of 30% of the value of the contract to one or more
   1. EMEs or QSEs owned by black women
   2. Black youth-owned EMEs or QSEs
   3. Black owned EMEs or QSES

Etc

I would be surprised if the criteria that may be used are ever extended beyond these examples. This could render the definitions I discussed above as superfluous.

Set-asides

One morning an incompetent minister was on the radio telling us how her equally incompetent department were going to use set-asides. I found myself agreeing with her. If the state procurement machine (as per the BBC's allegation) is still not benefiting black business then fuck it, just use set-asides. It's probably time to do it. Treasury has not traditionally been in favour of set-asides, for good reason – they are patently unconstitutional. Section 217 of the constitution requires a procurement that is fair, competitive, cost-effective, transparent and equitable. Set-asides preclude a class of people (juristic and natural) from bidding for certain contracts. I think Treasury has been clever by not expressly stating that black-owned businesses may only bid but they are effectively precluding competitive bids from other suppliers by using the example above.

For example – let's say a bid for a contract less than R30m states that you have to be a level 2 or higher. The message here is that only black-owned QSEs with a shareholding of 51% or higher may bid. The supply chain manager will argue that any company can get to a level two by implementing the QSE scorecard at great expense and get to 95 points on the QSE scorecard. But then again, only those companies with 25% black ownership can do this. There are issues here – bill of rights issues, competitive issues, cost effectiveness issues. And most importantly litigation issues.

Points advantage to black-owned EMEs and QSEs

A perennial factor. A 100% black-owned EME will have an 8 point advantage over their white-owned competitors. Is this extreme advantage reasonable and fair? As a white speaking non-Jedi I would say no. Understand that for my QSE business to vaguely compete I have to conduct a wide variety of extraneous activities that my black competitors do not need to.

By the time you get to the 90/10 it all pretty much normalises. Alarm bells must be rung if a company that produces a QSE BEE certificate bids for a R100.1million contract.

AND IN CONCLUSION MY DEAR KLEINBOOI

This is a good document. As I was writing this blog post I realised that my misgivings had been partially addressed within the draft. However experience has shown us that the average supply chain manager is not clued up about the legal complexities of state procurement and so abuse can be expected. Functionality levels can be set in such a way that only one bidder could ever qualify and this is in spite of paragraph 4(2) that requires objectivity.

I'll be sending my comments to the required email address (I'll remove the profanities before I do).

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