Government procurement as a policy tool in south africa
| Date | 01 March 2006 |
| Pages | 193-217 |
| DOI | https://doi.org/10.1108/JOPP-06-03-2006-B001 |
| Published date | 01 March 2006 |
| Author | Phoebe Bolton |
| Subject Matter | Public policy & environmental management,Politics,Public adminstration & management,Government,Economics,Public Finance/economics,Texation/public revenue |
JOURNAL OF PUBLIC PROCUREMENT, VOLUME 6, ISSUE 3, 193-217 2006
GOVERNMENT PROCUREMENT AS A POLICY TOOL IN
SOUTH AFRICA
Phoebe Bolton*
ABSTRACT. Prior to 1994, the government procurement system in South
Africa favoured large and established businesses and it was very difficult for
newly established business to enter the procurement system. In 1994, however,
government procurement was granted constitutional status, and was recognised
as a means of addressing past discriminatory policies and practices. This paper
critically analyses the way in which provision has been made in legislation for
the use of procurement as a policy tool. It is argued that the use of procurement
as a policy tool in South Africa is justified. On the whole, the primary legislation
dealing with the use of procurement as a policy tool offers an adequate effect to
the constitutionally prescribed use of procurement as a policy tool.
INTRODUCTION
The size and volume of government procurement contracts facilitates
the government’s decisions with regarding when and whom it contracts
with, and these decisions affect a number of issues. Aside from
government procurement being “business,” i.e., the acquisition of goods
and services on the best possible terms, it also has broader social,
economic and political implications (Labuschagne, 1985; Morris, 1998;
Turpin, 1972). Government procurement is and has, for example, often
been used to promote aims which are, arguably, secondary to the primary
aim of procurement. Examples include using procurement to promote
social, industrial or environmental policies (Arrowsmith, Linarelli &
Wallace, 2000; Cane, 2004; Turpin, 1989). It is in this regard that
government procurement is of particular significance to South Africa.
Due to the discriminatory and unfair practices of the past, a number of
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* Phoebe Bolton; B Proc, LLB, LLM, LLD, is a senior lecturer, Law Faculty,
University of the Western Cape, South Africa. Her research interests include
government contracts and government procurement.
Copyright © 2006 by PrAcademics Press
194 BOLTON
groups in South Africa were prevented from accessing government
contracts. Prior to 1994, the government procurement system was geared
towards large and established contractors. Thus new contractors found it
very difficult to participate in government procurement procedures
(Minister of Finance, 1997). The aim of this paper is to evaluate the way
in which the South African government has made provision for the use of
procurement as a means to address past imbalances.
The paper will begin with an overview of the policy objectives
underlying the use of procurement as a policy tool. Attention will then be
given to two constitutional principles that directly impact on the use of
procurement as a policy tool, i.e., the right to equality and the attainment
of value for money. Next, attention will be given to the constitutional
framework of preferential procurement in South Africa. Specific
attention will be given to section 217 of the Constitution of the Republic
of South Africa (108 of 1996) which makes provision for the use of
procurement as a policy tool and the legislation that has been enacted to
give effect to section 217, i.e. the Preferential Procurement Policy
Framework Act (5 of 2000) – hereafter the Procurement Act. Reference
will be made to other legislation that prescribes the use of procurement
as a policy tool, for example, the Public Finance Management Act (1 of
1999, as amended by Act 29 of 1999) – hereafter the PFMA, the Broad-
Based Black Economic Empowerment Act (53 of 2003) – hereafter the
BBBEEA, the Local Government: Municipal Finance Management Act
(56 of 2003) – hereafter the MFMA and the Local Government:
Municipal Systems Act (32 of 2000, as amended by Act 44 of 2003) –
hereafter the Municipal Systems Act. The primary focus, however, will
be on the Procurement Act and the Regulations thereto (Preferential
Procurement Regulations, Government Notice R725, Government
Gazette No. 22549, 10 August 2001) which were enacted to give effect
to section 217(3) of the Constitution.1 The Procurement Act and
Regulations will be critically analysed and attention will be given to the
way in which the courts have interpreted and applied the Act and
Regulations.
OVERVIEW OF POLICY OBJECTIVES
Using procurement as a policy tool can also be referred to as “wealth
redistribution” – using procurement to channel funds to discrete
categories of economic actors (e.g., previously disadvantaged groups in
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