Preferential Procurement Struggle: Promoting and assisting small business

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Small Business.jpg"We struggle to get large corporates to assist the many small businesses we mentor on the long and hard road to success," Bella Cebekhula of Shanduka Black Umbrellas told SmartProcurement.

“Procurement in South Africa is built around big companies and has very little to do with small business. We feel that government policy is not clearly directed for the benefit of the thousands of small to small to medium enterprises (SMEs) scattered across our national economy."

SmartProcurement took a fresh look at regulation 17 of the Preferential Procurement Regulations, which allows government procurement departments to award a maximum of two preference points to qualifying SME businesses.

For the purposes of considering these additional grounds of preference, it is necessary to understand the criteria for classifying a business as a SME.

The National Small Business Act, as amended by Act 26 of 2003, sets out the specific parameters to be applied in different sectors of the economy. You will find the schedule (annexure 1 to the Act), most useful.

Construction.jpgFor instance in Construction:

Micro - A business with five or less paid employees, with an annual turnover of less than R200 000 and a gross asset value (excluding fixed property) less than R100 000.

Very small - A business with 20 or less paid employees, with an annual turnover of less than R3-million and a gross asset value (excluding fixed property) less than R500 000.

Small - A business with 50 or less paid employees, with an annual turnover of less than R6-million and a gross asset value (excluding fixed property) less than R1-million.

Medium - A business with 200 or less paid employees, with an annual turnover of less than R26-million and a gross asset value (excluding fixed property) less than R5-million.

Hotel.jpgIn Catering and Accommodation the criteria are somewhat lower:

Micro - A business with 5 or less paid employees, with an annual turnover of less than R200 000 and a gross asset value (excluding fixed property) less than R100 000.

Very small - A business with 20 or less paid employees, with an annual turnover of less than R5.1-million and a gross asset value (excluding fixed property) less than R1-million.

Small - A business with 50 or less paid employees, with an annual turnover of less than R6 000 000 and a gross asset value (excluding fixed property) less than R1.9-million.

Medium - A business with 200 or less paid employees, with an annual turnover of less than R13-million and a gross asset value (excluding fixed property) less than R3-million.

SMME's must be made aware of these additional points when it comes to bidding and, as far as we are aware, many corporates elect to follow these guidelines in their Preferential Policies. If not, then it’s time to include these provisions as they can provide an additional incentive to the points already offered to black empowered enterprises.

This crucial aspect of the procurement function will be one of the many compelling focus points at SmartProcurement World 2011 – ‘How to dissolve the barriers to entry that confront small business in the delivery of their products and services to large corporates and government State Owned Enterprises?’

SmartProcurement World 2011 is now offering special 'budget' rates on 50 RED SEATS (T & Cs apply) for delegates who want to get their places booked early.

For more details visit www.smartprocurementworld.com or Contact Erieka Santos on 087 805 0893 or e-mail: events@smartprocurement.co.za.

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