Budget Speech 2018 Financial Sector Regulation Public Procurement

 

Madam Speaker,

 

It is the policy of this government to leverage public procurement to support black economic empowerment, industrialisation and development of small businesses.

 

Public procurement – worth hundreds of billions of rands annually – is a critical lever to change the production and ownership patterns of the economy to empower black people, women and youth.

 

For this reason, amendments to the Preferential Procurement Regulations became effective in April 2017.

 

Key changes include:

 

The Public Procurement Bill will be submitted to Cabinet in March 2018 for gazetting for public comments.

 

It will further enable government to use public procurement strategically to advance transformation, achieve efficiencies, and improve governance.

 

Treasury will increase collaboration with all law enforcement agencies to strengthen efforts to fight fraud, corruption and abuse of SCM system across all spheres of government in order to restore the integrity of supply chain management.

 

In recent years, a large number of deviations from normal procurement processes has reduced the credibility of the supply-chain management system.

 

Deviations can also result in anti- competitive practices that open the door to corruption, and which limit transformation by preventing small businesses from doing business with the state.

 

In future, deviations will be allowed only in rare, well-justified cases. Madam Speaker,

 

Government has a number of ‘evergreen’ contracts, which are open-ended.

 

Evergreen contracts create barriers to entry, making it impossible for new entrants to participate in the allocation of government contracts.

 

SMMEs and black-owned companies find it very difficult to participate in procurement opportunities as a result.

 

We are therefore in the process of reviewing all of these with a view to ending them in the majority of cases.

 

Madam Speaker,

 

Payment of suppliers on time is regulated by the PFMA and MFMA.

 

Next week, the Director-General of National Treasury will issue a directive to all government departments and public institutions, instructing them to pay suppliers on time, or be charged with financial misconduct.

 

This must be monitored by accounting officers, and National Treasury will strengthen oversight mechanisms in this regard.

 

We will work with colleagues in all spheres of government to improve performance of public entities on this critical issue.

 

Value for money and efficiency in spending remain critical in our drive to ensure the effective management of public resources.

 

We are currently rolling out the strategic procurement framework that provides for a differentiated approach of procurement based on the characteristics of each commodity.

 

A differentiated approach can achieve efficiencies through economies of scale, reduced duplication, and more transparent pricing.

 

In considering centralised procurement of certain commodities, we will be careful to avoid compromising competition and support for local economic development where provinces are best placed to procure such products and commodities.

 

Together with the Department of Public Works, we will embark on an intensive drive to reduce government spend on rental and property leases.

 

We will review the current three-year rental lease period which is prescribed for government departments, to lower the cost of financing for property lessors.

 

This will unlock growth and value in the property sector.