President Ramaphosa recently signed the Public Procurement Act 28 of 2024 into law. The Act establishes a comprehensive framework for the procurement of goods and services by all organs of the state in South Africa. This landmark legislation aims to combat corruption, enhance transparency, and promote economic development through preferential procurement practices.
The significance of public procurement in South Africa
Who does the Act apply to?
- Government departments: As defined in section 1 of the Public Finance Management Act.
- Constitutional institutions: Listed in Schedule 1 to the Public Finance Management Act.
- Municipalities and municipal entities
- Public entities: Listed in Schedule 2 or 3 to the Public Finance Management Act.
- Parliament and provincial legislatures: Specific sections such as Chapter 4, regulations made under section 63, including section 24(1)(d), are applicable.
- All procurement activities: Carried out by any person on behalf of a procuring institution, including procurement through donor or grant funding.
- Bidders: Any person who submits a bid or has been awarded a bid.
Key objectives of the Public Procurement Act
The objectives of the Public Procurement Act, 2024, with due regard to sections 195, 216, and 217 of the Constitution, include:
- Uniform standards: Introducing uniform treasury norms and standards for all procuring institutions to implement their procurement systems as envisaged in section 217(1), read with section 216(1), of the Constitution.
- Preferential procurement: Determining a preferential procurement framework for all procuring institutions within which to implement their procurement policies as envisaged in section 217(2) and (3) of the Constitution.
- Economic use of resources: Ensuring efficient, effective, and economic use of public resources through the assessment of costs, benefits, and risks.
- Ethical conduct: Advancing ethical conduct and combating corruption through access to procurement information and other transparency measures, and introducing enforcement and appropriate sanctions for transgressors.
- Transformation and industrialisation: Advancing transformation, beneficiation, and industrialisation.
- Economic development: Stimulating economic development by supporting goods produced and services provided in the Republic, procurement that is developmental in nature, and investment.
- Efficiency and technology: Improving efficiency and effectiveness in procurement by streamlining processes through the use of technology.
- Dispute resolution: Providing for effective and expedited dispute resolution of procurement-related decisions.
- Sustainability and innovation: Promoting innovation, sustainable development, and environmental rights as outlined in section 24 of the Constitution.
Main provisions
- Scope: The Act applies to all government departments, constitutional institutions, municipalities, and public entities, creating a unified procurement system.
- Preferential procurement: It sets out a framework for preferential procurement to promote local economic development and support historically disadvantaged individuals.
- Public procurement office and tribunal: Establishes the Public Procurement Office within the National Treasury, with powers to issue binding instructions and conduct investigations. An independent Public Procurement Tribunal will review decisions and ensure compliance with the Act.
- Use of technology: The Act mandates the development of an ICT-based procurement system to enhance efficiency, effectiveness, transparency, and integrity, and to combat corruption.
Implementation and compliance
The Act aligns with Section 217 of the Constitution, ensuring procurement systems are fair, equitable, transparent, competitive, and cost-effective. Administered by the Minister of Finance, the Act replaces previous interim measures and harmonises procurement regulations across all state organs .
Impact on public procurement
- Efficiency: The new framework leverages technology to streamline procurement processes, making them more efficient and reducing administrative burdens.
- Economic participation: By broadening opportunities for local businesses, the Act aims to foster economic growth and create jobs, particularly benefiting small and medium-sized enterprises (SMEs).
- Anti-corruption measures: The Act includes stringent anti-corruption provisions, including binding codes of conduct for procurement officials and improved processes for disbarring non-compliant suppliers.
The public’s reaction
Various publications, including Business Day, report mixed reactions from the public:
- EWN: Hill-Lewis urges Ramaphosa to halt Public Procurement Act, says it will hinder service delivery
- COSATU is deeply dismayed by ill-conceived attempts to halt the Public Procurement Act by the Western Cape Provincial Government.
- Western Cape, Cape Town launch protest against new procurement law.
- Alan Winde (Premier, Western Cape): “We firmly believe that the act in its current form does not pass constitutional muster as it usurps the autonomy of provinces and municipalities in adopting their own preferential procurement policies…”
- Daily Maverick: SA’s new widely hailed Public Procurement Act could fuel State Capture 2.0
- Black Business Council: “In our view, this is the most important legislation, secondary only to the constitution.” “This legislation will ensure that the state is able to set aside procurement opportunities for blacks, women, youth and people with disabilities.”
- Business lobby group Sakeliga: The Act is “a recipe for accelerated state failure” that was “unconstitutional and harmful”. It condemned the bill for requiring all state entities to procure goods and services “only from an artificially small pool based on race, nationality,” and other criteria, arguing this would increase prices and reduce service quality. “This act seeks to severely restrict state entities’ procurement choices, increasing expenses and diminishing service quality while potentially facilitating corruption on an unprecedented scale,” Sakeliga said in a statement.
- Proudly SA, the country’s buy-local campaign, praised the effective “reinstatement” of local content requirements in the public sector, noting that this would benefit all industries that had gained from similar provisions in the now-repealed Preferential Procurement Policy Framework Act. “Industries and companies producing and supplying these designated items will be able to sustain existing jobs, with much-needed new jobs possibly emerging,” CEO Eustace Mashimbye told Business Day. “Our plea is for all government departments and entities to which these rules apply to fully comply with the provisions of the bill, to avoid the high levels of noncompliance witnessed with the previous preferential procurement regulations.”
- Steel and Engineering Industries Federation of Southern Africa (Seifsa) COO Tafadzwa Chibanguza said the provision for designating items, particularly the explicit preferences for acquiring locally produced goods and local content, is “critical for driving industrialisation,” though he also noted that a finalised public procurement instrument is still pending.