How the Public Procurement Act Affects Your Business

The recent signing of the Public Procurement Act, officially Act No. 28 of 2024, by President Cyril Ramaphosa marks a pivotal moment for businesses seeking to engage with government entities in South Africa. Although the Act has been signed into law, it is important to note that its provisions are not yet in force. The President will bring the Act’s provisions into operation through a proclamation in the Gazette, with the possibility of a phased implementation for different categories of procuring institutions.

What is the Public Procurement Act?

The Public Procurement Act, which was published in the Government Gazette on 23 July 2024, seeks to combat corruption, but also reinforce the role of Broad-Based Black Economic Empowerment (BEE) in promoting economic transformation, making BEE compliance even more critical for businesses looking to secure government contracts. Once effective, the Act will address weaknesses in the procurement system that have historically enabled corruption, including during the state capture era.

Key Features of the Public Procurement Act

1. 1. Centralised Procurement Framework
      The Act, overseen by the Minister of Finance, aims to create a consistent and fair approach to state procurement. By standardising the rules for how government entities make purchases, it helps eliminate the loopholes and inconsistencies that previously opened the door to corruption.
   2. Anti-Corruption Measures
      Building on the findings of Chief Justice Raymond Zondo from the Commission of Inquiry into State Capture, the new Procurement Act introduces strong anti-corruption measures. It creates a Public Procurement Office within the National Treasury to protect the integrity of procurement processes. One key change is that public officials and employees of public entities are now banned from submitting bids, tackling a major source of corruption exposed during the state capture era.

The Act also includes steps to prevent tender bid manipulation, ensuring that procurement is fair and transparent. Suppliers found guilty of fraud or corruption will face a “debarment order,” which prohibits them from participating in procurement activities for a set period.

1. 1. Promotion of Local Economic Growth
      A key goal of the Act is to boost local economic development by prioritising the purchase of goods and services made in South Africa. This approach supports the government’s broader strategy to create jobs and strengthen industries essential to the country’s economic growth. As Minister of Trade, Industry, and Competition Parks Tau highlighted, local procurement will be a driving force behind increased demand in targeted sectors, especially through infrastructure projects.
   2. Constitutional Compliance and Transformation
      The new Procurement Act replaces the temporary procurement rules that were introduced in January 2023 after the Constitutional Court ruled that the previous regulations were unconstitutional. 

The new legislation aligns with Section 217 of the Constitution, which requires procurement to be “fair, equitable, transparent, competitive, and cost-effective.” Additionally, it includes provisions that prioritise businesses owned by historically disadvantaged individuals, including Black South Africans, women, youth, people with disabilities, and military veterans.

What the Public Procurement Act Means for Your Business

The Public Procurement Act has major implications for BBBEE compliance, making it crucial for businesses to align with the new regulations. If your company is BEE-certified, you’ll have a stronger advantage when bidding for government contracts, as the Act places a greater emphasis on BBBEE in the procurement process.

To stay competitive, it’s important to ensure your business meets the updated requirements, including the Act’s focus on local content and transformation. By aligning your strategy with these new guidelines, you’ll be better positioned to win contracts and grow your business through government opportunities.

What Should Businesses Do Next?

• • Review and Align: Companies should immediately review their current BEE status in light of the new Procurement Act’s requirements.
  • Stay Informed: Continuous updates from BEE verification agencies will be crucial as the new regulations take effect.
  • Engage Early: Businesses should engage with BEE verification agencies early in the procurement process to ensure compliance with the necessary standards.

The Public Procurement Act is more than just a legal framework; it’s a roadmap for inclusive and sustainable business practices in South Africa. By understanding and aligning with its requirements, businesses can continue to contribute positively to the country’s economic landscape while securing vital government contracts.