The Civil Engineering Contractor January 2018 | Page 31

INSIGHT
So what are the legalities around this?
Ricardo Pillay, partner at Dentons.
Ricardo Pillay, partner at
Dentons South Africa, shares
some insights.
It is my understanding that the purpose for
the South African government extending
the SA-Cuba co-operation agreement in
the field of water resource management
and water supply to 2023 is to ensure
co-operation in the highly specialised areas
of geo-hydrology and engineering services
(in rural and other disadvantaged areas).
The Department of Water and Sanitation
has used the co-operation agreement to
acquire as much specialised skills as possible
(and to ensure a transfer of skills) within
the sector. Steps have been taken to identify
specific training needs so that these can
meet a shortage of skills gap that has
been identified in the sector. The Engineer
Council of South Africa has also taken steps
to process requests for Cuban engineers
to be recognised as professional specialists.
An important dimension of public
procurement law is the granting of
preferences to certain categories of
suppliers in support of economic
transformation. This practice is known as
preferential procurement.
Section 217 of the Constitution provides
that when an organ of state in the National,
Provincial or Local sphere of government,
or any other institution identified in
national legislation, contracts for goods or
services, it must do so in accordance with a
system which is fair, equitable, transparent,
competitive and cost-effective. The need
to implement a procurement policy that
will provide for categories of preference
in the allocation of contracts; and the
protection or advancement of persons,
or categories of persons disadvantaged by
unfair discrimination is crucial.
Moreover, section 217(2) of the
Constitution, also allows for 'categories of
preference in the allocation of contracts'.
The Preferential Procurement Policy
Framework Act (PPPFA) was enacted to
cater for this. The PPPFA stipulates that
when government assesses contracts, it
must consider a preference point system
which prescribes functionality and price.
A second key piece of legislation that
regulates public procurement is the Broad-
Based Black Economic Empowerment
Act (B-BBEE Act) and the Codes of Good
Practice.
The objectives of the B-BBEE Act are,
among other things, to:
• promote economic transformation
to enable meaningful participation of
black people in the economy;
• increase the extent to which
communities, workers, and other
collective enterprises access
economic activities, for example,
construction companies sourcing
labour from local communities or
outsourcing opportunities previously
disadvantaged people; and
• empower rural and local
communities by enabling access to
economic activities by advertising
and allowing for black owned
businesses to be involved in
economic activities.
Importantly, section 10 of the B-BBEE
Act states the following:
'(1) Every organ of state and public
entity must apply any relevant code of
good practice issued in terms of this
Act in:
(a) Determining qualification criteria
for the issuing of licences, concessions
or other authorisations in respect of
economic activity in terms of any law;
(b) Developing and implementing
a preferential procurement policy;
(c) Determining qualification criteria
for the sale of state-owned enterprises;
(d) Developing criteria for
entering
into
partnerships
with the private sector; and
(e) Determining criteria for the
awarding of incentives, grants and
investment schemes in support
of Broad-Based Black Economic
Empowerment.
(2) (a) The Minister may, after
consultation with the relevant organ
of state or public entity, exempt the
organ of state or public entity from a
requirement contained in subsection
(1) or allow for deviation there from if
particular objectively verifiable facts or
circumstances applicable to the organ
of state or public entity necessitate an
exemption or deviation.'
Although the BEE Act does not place a
legal onus on the private sector to comply
with its provisions, it does, however,
place a legal onus on organs of state to
contribute to B-BBEE, including among
other aspects, when developing and
implementing a Preferential Procurement
Policy. Simply put, government entities
must procure goods and services from
companies with a good B-BBEE status.
This has a trickle-down effect which
applies pressure on all suppliers and
service providers to meet these standards.
In addition, the Preferential
Procurement Regulations recommend
how to address the objectives of the
Industrial Policy Action Plan, especially
those aimed at promoting the
procurement of domestically-produced
goods and services. The Preferential
Procurement Regulations stipulate that
the dti can designate specific industries
of critical and/or strategic importance,
for tenders in which it is indicated that
only locally-manufactured products with
a prescribed minimum threshold for local
content will be considered.
Considering the above, given the
nature and purpose of the co-operation
agreement between the two governments,
it is unlikely that the labour sourced
will form part of a prospective public
tender between an organ of state and a
potential private party. If that was the
case the relevant legislation referred to
above would need to be followed, unless a
deviation or exception was granted under
section 10(2) of the B-BBEE Act. nn
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