Improving State Procurement for real empowerment – this was the theme of the Broad-Based Black Economic Empowerment (B-BBEE) Commission’s annual conference, held on 15 March 2018.
In terms of Section 13G of the B-BBEE Act, all State entities and Government departments are required to submit their B-BBEE report (verification) to the B-BBEE Commission on an annual basis. All State entities and Government departments are required to implement B-BBEE. These entities does not have an option whether they want to implement B-BBEE or not. More important – they are not exempted from implementing and taking part in B-BBEE. This was confirmed by Minister Davies during the annual conference.
Most of the State entities and Government departments are under the impression that they do not have to comply and implement B-BBEE. This is, however, not true. They must still go through a verification and obtain a rating, which will be done on the specialised scorecard which excludes Ownership. The B-BBEE Commission has confirmed that out of the 195 compliance reports received by the B-BBEE Commission, only 8 was from State entities and Government departments. There was no reports submitted by any of the Sector Education and Training Authorities (SETAs) who are also required to implement B-BBEE.
It is also required by Section 10 of the B-BBEE Act that all government and state entities apply and integrate B-BBEE requirements in awarding licenses, contracts, incentives and concessions to entities that are B-BBEE compliant. Minister Davies confirmed that Section 10 of the B-BBEE Act was specifically amended for this purpose.
With all the pressure being applied to State entities and government departments it is clear that the supply chain managers will start awarding contracts and tenders to entities that does comply with the B-BBEE Act.
Seeing as the theme of the conference was procurement, the problem with intermediary procurement was also addressed. It was confirmed that the B-BBEE Commission have identified a trend in where 51% Black Owned entities are created to be exclusively used to market and supply their products. This is a form of fronting called opportunistic intermediary. Opportunistic Intermediaries are defined by the DTI as:
…enterprises that have concluded agreements with the other enterprises with a view to leveraging the opportunistic intermediary’s favourable B-BBEE status in circumstances where the agreement involves:
- Significant limitations or restrictions upon the identity of the opportunistic intermediary’s suppliers, services providers, clients or customers;
- Maintenance of their business operations in a context reasonably considered improbable having regard to resources.
According to Minister Davies, the B-BBEE Commission has to be tougher on these type of entities as well as any entity that tries to bypass or circumvent the B-BBEE Act. If found guilty of such practices they will be open for prosecution.