Navigating the impending Public Procurement Bill

South Africa is on the brink of significant changes in its procurement landscape with the impending introduction of a new Public Procurement bill. This legislation promises to reshape how businesses engage with government contracts, presenting both challenges and opportunities.

On 22 May 2023, the Public Procurement Bill [B 18-2023] was introduced into Parliament. The primary purpose of the Bill is to create a single piece of national legislation that regulates public procurement, including preferential procurement. This Bill stands to give effect to the entirety of section 217 of the Constitution, so it goes without saying that its introduction is the most significant development in Public Procurement Regulation in South Africa.

Public procurement accounts for a significant portion of government expenditure — nearly a trillion rand and approximately 22% of South Africa’s GDP. It serves as a powerful lever to incentivise government policies across the entire economy and presents an ideal opportunity for government to address dire socio-economic conditions by incentivising companies to engage in behaviours that contribute positively to the goals of national importance.

Treasury’s new requirements propose five approaches for providing preference:

  • setting aside contracts for business owned by preferred groups.
  • limiting bidders to companies that meet specific criteria, such as BEE ratings/ownership.
  • points for preferred groups that potentially allows a bid to win even if it is three times more expensive than a non-preferred group’s bid.
  • mandating winning bids to sub-contract part of the contract to business owned by preferred groups.
  • designating certain sectors or products exclusively for local manufacturing.

While there is strong support for the proposed Public Procurement Bill, there is equally strong opposition to it. “We saw some chaos when Government Departments and State-Owned Enterprises started to apply arbitrary Black Ownership requirements to tender requests and we were hoping that the new bill would stabilise the ship, but unfortunately it seems it will entrench the arbitrary application of Black Ownership in tenders and will, most likely, result in a new wave of ineffective joint ventures and fronting deals” says Deon Oberholzer, CEO of the Gestalt Group.

Although opinions may vary, what is clear, is that there will be an increased focus in procurement partiality for businesses owned by preferred groups, And while enhancing black equity ownership in businesses is a crucial step toward economic inclusivity and social justice, it’s not always a simple and hassle-free process.

There are four main options available to create equity ownership: Direct equity ownership; Employee Share Ownership Plans (ESOP); Broad-based Ownership Schemes and joint ventures.

Direct equity ownership, joint ventures and ESOPs all provide immediate and tangible benefits but can be costly and complex to implement. The remaining option of Broad-based Ownership Schemes spread benefits more widely than the others and, we believe, is the optimal BEE ownership opportunity, but without assistance, it can be complex to set up.

We believe in empowering businesses with a thorough understanding of the risks, opportunities, and restrictions associated with BEE Ownership transactions. Through our engagement process we provide valuable insights into the intricacies of these transactions to enable informed decisions and achieve sustainable success.

Intombazane, an existing and successful broad-based ownership scheme, is structured to be the best possible BEE Ownership transaction available. It offers a business friendly approach and the assurance that any benefit that may accrue to Intombazane is for the development of young people. Young Black Women to be precise. It offers relevant, legitimate and compliant BEE ownership, without the risk of fronting.

As a well-structured BEE shareholder , Intombazane ensures its investment companies meet all critical considerations such as real empowerment, BEE points, business benefits, costs, risk, shareholder value, sustainability, and rules of an eventual exit with a share purchase model that is designed to provide an optimal value and benefit balance.

Introducing a B-BBEE partner to a business requires careful consideration of various vital factors. To learn more about how you can turn B-BBEE into a strategic asset for your business, visit: