For years South Africa has battled the plight of loadshedding. Despite many promises over the years for the issue to be addressed, loadshedding has become part of our daily lives. It was therefore encouraging when, on Wednesday 23 August, South Africa signed the Framework Agreement on Cooperation in Green Energy, a joint memorandum of cooperation on energy issues, with the People’s Republic of China as part of the 2023 BRICS Summit.

Of further interest was the advice given by the chairperson of the China Africa Development Fund, Mr Song Lei, to South Africa that tendering processes should be streamlined and broad-based black economic empowerment (BEE) rules should be relaxed.

This advice brings up the age-old debate regarding BEE and its impact on foreign investment – BEE is a policy developed for the benefit of Black people to address disparity of opportunities in South Africa due to Apartheid.  Black people is specifically defined in BEE to mean African, Indian and Coloured persons who are South African citizens. Non-South Africans therefore cannot be recognised towards BEE. BEE is primarily driven through the South African economy by Government which achieves this by including criteria in their tenders that respondents must have certain BEE credentials. By relaxing the BEE requirements in relation to its tenders, Government would essentially take away the primary driver of BEE and consequently decrease the incentive for companies to implement BEE.

Is this something Government is able to do? Currently, yes. The 2017 Preferential Procurement Policy Framework Act (PPPFA) regulations included a regime that prescribed points allocated to bids based on their BEE level. However, the 2017 PPPFA regulations have since been repealed and replaced with the 2022 PPPFA regulations which no longer contains this BEE-points regime, and instead allocates the points to the “specific goals” set out in the tender document. The PPPFA itself does not prescribe the specific goals. Therefore it is Government’s prerogative to design what those are – and to include transformative goals within that scope. Without the points allocated to BEE, foreign investors would have greater opportunity to participate in Government tenders and, potentially, a higher likelihood of being awarded the tenders.

If this approach is adopted, it is unlikely that it would be well-received by all divisions of Government. BEE Commissioner, Tshediso Matona, was recently quoted as saying “We should not be made to feel apologetic about advocating for the acceleration of economic transformation. This is the problem we need to address head-on… B-BBEE is an ecosystem that requires all the policy moving parts to work together to succeed. There is a legal component that I have to apply and there is a political dimension of it where the role players have to play their part.”  It is clear from this sentiment that BEE requires not just legal compliance, but political support for it to have the truly positive and transformative impact it was created to have. 

But the legal landscape for public procurement is ever changing, with the Public Procurement Bill, 2020 already in draft, although it proposed finalisation by March 2023 has not yet occurred.  The Public Procurement Bill will create the authorising provision for the equivalent of the 2017 PPPFA regulations to be published. 

So which does Government give higher priority to – transformation, or foreign investment?  Whether this choice is starkly made remains to be seen.