Committee Report on Local Public Procurement Colloquium

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Trade and Industry

16 September 2016
Chairperson: Ms J Fubbs (ANC)
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Meeting Summary

Document handed out:
Committee Report on Local Public Procurement Colloquium
[All Committee Reports available under Tabled Committee Reports once published]

The Portfolio Committee met to discuss the first draft of the Colloquium report on Local Public Procurement. This was a preliminary meeting to ensure that stylistically there was broad understanding of the document. The Chairperson took the Members through the draft report page by page. It was noted that the numbering needed to be corrected.

The main issues discussed were the advantages of applying sanctions for non-compliance, as against offering incentives in the form of tax breaks or a merit points system, and who would bear the costs of verification. 

Meeting report

Draft Committee Report on Local Public Procurement Colloquium

 The Chairperson tabled the draft Committee Report on Local Public Procurement Colloquium for consideration. She indicated that Members would go through the document page-by-page and give their input.

Mr N Koornhof (ANC) said the industry was participating more with incentives.

Mr A Williams (ANC) said that he did not think the Committee should give the private sector room, as every time it was given room, it just exploited any gap it could get and avoided implementing things as far as possible. The private sector must get an incentive to localise and they must implement Broad-Based Black Economic Empowerment (BBBEE). It would be coupled together. If the private sector was transformative in character and buying locally, then it could get an incentive. He asked if, during the colloquium, the Committee had not discussed that, local procurement should be an audited outcome.

The Chairperson asked if the aspects related to the Auditor General (AG) should be kept separate, or if they should be integrated.

Mr Williams asked who should bear the cost of verification. What had the AG implied? He said that should be changed.

The Chairperson said there should not be more than five recommendations, otherwise those involved would not do anything about it.

Mr Williams said he thought even five recommendations may be too much. The issue here was verification and the cost thereof. He suggested that maybe the Committee should make three recommendations, which would be for verification, who paid for it, and the private sector tax issue.

Mr Koornhof asked if it was not possible to specify that if one bought locally, one was awarded a point, and if one bought from a BBBEE supplier, then one would get a bonus point, as this would focus the private sector on finding local manufacturers.

Mr Williams said the Committee had to balance BBBEE with local procurement, and could not balance the one and cancel the other. The Committee needed to look at what the government’s position on transformation was. Was its emphasis more on local procurement, or less?

Mr Koornhof agreed, but added that the points system could be used as an incentive.

Mr Williams said he did think the conclusion in the report should read “non-compliance with impunity”, because there were no rules with which to comply. He suggested that perhaps it should be changed to non-compliance in respect of local goods instead. The Committee should now look at who was going to pay for the verification

Mr Koornhof said a company with local content products must obtain Finance Intelligence Centre Act (FICA) verification themselves that they had local content.

Mr Williams said one of the things that should be looked at was the contract. If a company broke that contract, it should be specified that legal action would be taken against it.

Mr Koornhof said that if there was a register, it should be easy, and if a company was verified once, there should be no need to verify it again.

The Chairperson said that that part of the process should be simple. She asked why the preliminary process of verification was costly.

Mr Williams said it was difficult to say now what the problems might be in the future. The Committee should first focus on who was going to pay, and settle that.

The Chairperson said that the Committee should come back to the issue of sanctions, and suggested a stick and carrot approach, offering a little carrot to encourage purchasers to move.

Mr Williams said the contract should be used as the stick, because the government needed to enforce its regulations when a company did not comply. There should be another way, but it went back to the verification process. He suggested that maybe there should be a tax break.

The Chairperson said that there should be a sanction.

Mr Koornhof said what the government wanted to achieve was local procurement. How government achieved that -- whether by a tax incentive or a points system -- was good, because it created jobs. If people were acting fraudulently, there must be sanctions.

The Chairperson said that the principle of sanctions must be there, but it had to be balanced with an attractive incentive. The second issue that needed to be looked at was the verification.

Mr Williams said that with regard to co-operatives and emerging companies, there needed to be a level beneath which the government paid for verification, because at the end of the day the government was going to pay anyway. He said the government would pay eventually because the big companies would add the cost in.

The Chairperson asked how long it took for designation to occur.

Mr Williams said that it should stated in the report’s conclusions that the government did not want a situation where BBBEE was compromised because it wanted local procurement.

The Chairperson said that the first issue had been the cost, the second one had been sanctions and incentives. She said that the other one was verification, and it was a huge challenge. She asked if the Committee should leave it, or say it was prepared to pay a premium.

The meeting was adjourned.

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