UPDATE ON THE PREFERENTIAL PROCUREMENT REVIEW Presenter: Henry Malinga | Chief Director : Supply Chain Policy | 08 February 2012

BACKGROUND The conflict between the PPPFA and the aims of the B-BBEE Act resulted with the revision of the PPPFA Regulations. Preferential Procurement Regulations, 2011 has been brought in line with the aims of the B-BBEE Act using the balance scorecard methodology as prescribed by the B-BBEE Act and its Codes of Good Practice PPPF Act, 2000, Act 5 of 2000 is still effective and the revised Preferential Procurement Regulations, 2011 has been issued in terms of the section 5 of the PPPF Act, thus repealing the Preferential Procurement Regulations, 2001

BACKGROUND cont. Regulations promulgated by Minister of Finance on 8 June 2011 – Government Gazette No 34350. Revised Regulations came into effect on 7 December 2011 During the period between the 08 June 2011 and 07 December 2011, 47 workshops (1236 attendees) were held with all affected practitioners Implementation guidelines were issued.

MAIN CHANGES IN THE REVISED PPPFA REGULATIONS The B-BBEEA scorecard methodology was adopted to be utilised in the evaluation. Evaluation of bids to determine points out of 10 or 20 for B-BBEE Status Level of Contribution Points to be awarded to a bidder based on his or her B-BBEE status level of Contribution Eg. Level 1 contributor would receive 10 points whilst level 4 contributor would receive 5 points out of a maximum of 10 points. Eg. Level 1 contributor would receive 20 points whilst level 4 contributor would receive 12 points out of a maximum of 20 points. Calculation of points to be based on the B-BBEE ratings of a bidder as follows:

Calculation of points for B-BBEE RATINGS B-BBEE Status Level of Contributor Number of points (90/10 system) Number of points (80/20 system) 1 10 20 2 9 18 3 8 16 4 5 12 6 7 Non-compliant contributor

MAIN CHANGES IN THE REVISED PPPFA REGULATIONS cont. Designation of sectors for Local Content Provides for dti to research and designate sectors for local content To date, the Minister of the dti has approved 5(five) sectors/sub-sector/ industries for designation viz.; Textile, Clothing, Leather and footwear 100% Power Pylons 100% Buses (Bus body) 80% Canned / Processed Vegetables 80% Rolling Stock 65%

MAIN CHANGES IN THE REVISED PPPFA REGULATIONS cont Through the revised Regulations, Organs of State are compelled: To establish whether or not goods, services or works for which an invitation for tenders is to be made, have been designated for local production by the dti; To meet the prescribed thresholds of local production and content for those sectors and sub-sectors so designated; To ensure compliance with the regulations including the afore mentioned amendments as per the instructions issued by the National Treasury; To utilise the two stage bidding process where the first stage involves functionality and minimum threshold for local production and content and the second stage being price and B-BBEE compliance.

MAIN CHANGES IN THE REVISED PPPFA REGULATIONS cont Applicability The Preferential Procurement Regulations are applicable to organs of state as contemplated in section 1 (iii) of the PPPF Act and all public entities listed in Schedules 2, 3A,3B, 3C and 3D of the PFMA and municipal entities The Preferential Procurement Regulations will thus be extended to all organs of state for uniformity purposes

EXEMPTIONS Due to practical reasons, the following institutions were exempted: Public Entities listed in Schedules 2, 3B and 3D of the Public Finance Management Act, 1999 (Act No.1 of 1999) The Provisions of Regulations which Exemption applies: Regulation 2(2); 3-8; 10; 11(1) –(9); 11(11) to (13); 12-13 The duration of the exemption is until the 07 December 2012

FURTHER WORK TO BE DONE COMPREHENSIVE REVIEW. The revised Regulations are an interim measure and the first phase of the comprehensive review. The terms of reference of the second phase are being finalized, The technical work around the review will be completed by the end of the 2012/13 financial year. This process of the review shall be a consultative process which includes all relevant stakeholders.

Discussion