How will the National e-Procurement portal affect set-asides for small business?

While national treasury is pushing ahead with an e-procurement portal, questions are being raised about what has become of the 30% of procurement budgets set aside for small, medium and micro enterprises (SMMEs) that President Jacob Zuma announced in the 2015 state of the nation address.

Last month, finance minister Pravin Gordhan said in his budget speech that from April 1 all companies wishing to do business with national and provincial government their entities must be registered on national treasury’s central supplier database. Municipalities will join on July 1.

Suppliers and government departments will then have to use government’s eTenders online portal.

Small business development minister Lindiwe Zulu said in her budget vote speech in May last year that she expected a practice note on the idea of “set-asides” to be drafted and released by national treasury by September that year. However, nothing has been released yet.

The department of small business development’s spokesman, Cornelius Monama, this week referred all queries to national treasury. But treasury did not want to tell the Financial Mail when or even whether the practice note would be released.

The e-Tenders portal will allow anyone with Internet access to view tender documents free of charge, which should improve smaller firms’ access to tenders. This could drive up the participation of small businesses in state procurement — as it did in South Korea and Chile, after similar portals were launched there in recent years.

National treasury media liaison Xolisa Dodo says that with the introduction of treasury’s central supplier database, all supplier information including BEE status and location — down to ward level — will be available to all practitioners and departments. Notification services can then be used to inform targeted small business groups of government opportunities, she says.

So far 107,000 users have been registered and 40,000 compliant suppliers are available on database.

While Dodo concedes that adoption by small businesses of the e-portal is dependent on the speed with which broadband is rolled out, she adds that walk-in centres are an interim alternative solution.

But the department of small business development’s special adviser, Thami Mazwai, is not convinced the e-portal will boost SME participation in state tenders. In a recent newspaper opinion piece he said small businesses must compete with “heavily resourced” competitors on the e-portal.

“The set-asides would give these small or black-owned entities a fighting chance. Instead, we are told set-asides are unconstitutional,” he wrote, alluding to a 2006 practice note in which treasury outlawed the practice.

Another concern of national treasury’s is that set-asides could push up procurement costs, partly because bigger companies (given their economies of scale) are able to offer lower prices. In a procurement review released in February last year, treasury said it was willing to consider set-asides if cost premiums were minimised and the measure was constitutional.

But Black Business Council (BBC) secretary-general Xolani Qubeka believes a “developmental cost” of expanding the economic and consumer base must be factored in.

He does, however, admit that the BBC, which initially lobbied for set-asides, has not conducted any research on how many small businesses could benefit or how many jobs could be created if a set-aside were to be approved.

Treasury, however, would probably have to overhaul the Preferential Procurement Policy Framework Act to allow for set-asides to go ahead, Qubeka says.

He points out that treasury tried last year to resolve this issue by suggesting that tenders of R10m or below would only have to be subjected to 50% preferential points.

He says the BBC did not support this, as it would limit it to smaller contracts for black firms.

This article first appeared on 

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