(SEW)
STRENGTHENING LOCAL GOVERNMENT
PROCUREMENT POLICIES TO SUPPORT LED
17 MARCH 2011
BY: Winile Mntungwa
BACKGROUND
PREVAILING FACTOR
 Local government is major procurer of services in local
community………
PROBLEM STATEMENT
 How the eThekwini Municipality (EM)has used/uses
procurement to support LED in the local community?
CURRENT SUPPLY CHAIN MANAGEMENT
(SCM) FRAMEWORK OF EM
 From the existence of the Preferential Procurement Policy Framework Act (PPPFA)
No.5 of 2000, Preferential Procurement Regulations followed in 2001, which gave
guidance for the implementation of the said act.
 EM developed it’s own Targeted Procurement Policy which was adopted by Council in
June/July 2003. This changed the way we recognized Targeted Businesses and
allocation of preferential points.
 For all tenders with the rand value from R30K up to R500K, 20 points are allowed for
preferential status and the remaining 80 points for the price and functionality.
 For all tenders with the rand value above R500K, 10 points are allowed for preferential
status and the remaining 90 points for the price and functionality.
 New outlook of preferential procurements points allocation to HDI companies or
subcontracting to HDIs and other new categories of recognition.
ACRONYM DEFINITION
 Historically Disadvantaged Individual (HDI) : Includes Black, Women, and Disabled
Individuals and preference has been given to all these target groups who, due to the apartheid
policy that had been in place, had no franchise in national elections prior to the introduction of
the Constitution of the Republic of South Africa, 1983 (Act no 110 of 1983) or the Constitution of
the Republic of South Africa, 1993 (Act No 200 of 1993) (the Interim Constitution). Provided
that a person who obtained South African citizenship on or after the coming to effect of the
Interim Constitution, is deemed not to be an HDI.
 Priority Population Group (PPG): Black Individuals who fall into population groups that were
not offered a franchise in the national elections before or after the introduction of the 1984 tricameral parliamentary system and only received a franchise during 1994. That exclusion had a
major negative bearing on their lives therefore, resulting in them being worse affected in terms
of poverty levels, unemployment and/or unfulfilled basic needs (Water, Electricity, Housing &
Sanitation).
 Black Business Enterprise (BBE): At least 26% Black Owned in terms of equity and voting
rights/powers, with a corresponding management representation at all levels.
 Priority Business Enterprise (PBE): At least 26% Owned by individuals which are from the
Priority Population Group in terms of equity and voting rights/powers, with a corresponding
management representation at all levels.
ACRONYM DEFINITION…..cont
 Women Business Enterprise (WBE): At least 26% Women Owned in terms of equity and
voting rights/powers, with a corresponding management representation at all levels. See below,
for various categories of ownership and management.
 SMME’s : Are Small, Medium & Micro Enterprises
 Local Content/Resources/Businesses: Local Resources for the purposes of this policy is
EThekwini Municipality Area first, KZN second and SA third and where applicable, Africa
fourth.
 Participation Goals: Participation goals and preferences are set for companies who meets the
minimum requirements in terms of a Balanced Score Card as stipulated in the Department of
Trade and Industry’s Broad Based Black Economic Empowerment Strategy. This will apply mainly
to major contracts and/or engagements.
 Payment to SMME`s (EARLY PAYMENT CYCLES)
SMME`s within the Very Small and Micro categories are paid within 14 days of receipt of approved
invoice. All other payments are to be within 60 days from date of delivery or in the
NEW CATERGORIES OF RECORGNITION
 Historically Disadvantaged Individuals (HDIs)
 Priority Population Group (PPGs)
 Black Business Enterprise (BBE)
 Priority Business Enterprise (PBE)
 Women Business Enterprise (WBE)
 Small, Medium & Micro Enterprises (SMME’s)
 Local Content/Resources/Businesses
Other Preferential Arrangements include the following
Participation Goals:
Payment to SMME`s: 14 days vs 4 weeks (30 days)
DEFINITIONS OF COMPANY OWNERSHIP
RECORDNITION LEVELS
 Influenced Company:
when ownership is between 26% and 50%, with corresponding
management representation at Board, Executive and
Operational levels.
 Empowered Company:
when ownership is between 51% and 75%, with corresponding
management representation at Board, Executive and
Operational levels.
 Substantially Owned Company:
is between 76% and 100%, with corresponding management
representation at Board, Executive and Operational levels.
CONTRACTS /TENDER ADJUDICATION METHODS
USED BY ETHEKWINI MUNICIPALITY
For all values = or < R500 000
 80/20 scoring is used: 80 points are for the price &
functionality and 20 points for the preferential/BEE
status
For all values > R500 000:
 90/10 where 90 points are for the price & functionality
and 10 points for the preferential/BEE status
 EM were the first to include Priority Population Group and PBE’s in
their policy to address the skewed results achieved prior to this policy.
 This policy was hailed as the best policy in the country and very
progressive.
 Through this policy a lot has been achieved in terms of the Economic
Transformation as would be seen from the figures shown in the
achievements slide.
THE JOURNEY ACHIEVEMENTS
TARGETED PROCUREMENT ADJUDICTAION
FRAMEWORK RATING : < R500K
NO
1
2
3
4
5
6
CRITERIA
Competency, Specialist input &
experience of consultant/service provider
(25)
Understanding of the brief, originality &
relevance
(25)
Capacity to deliver the required quality
within the specific timeframe
(20)
Price (Budget)
(10)
EMPOWERMENT
 SMME
 Location
 Ownership
(20)
Total Scores
(100)
SCORING
REMARKS
TARGETED PROCUREMENT ADJUDICTAION
FRAMEWORK RATING : > R500K
NO
1
2
3
4
5
6
CRITERIA
Competency, Specialist input &
experience of consultant/service provider
(30)
Understanding of the brief, originality &
relevance
(25)
Capacity to deliver the required quality
within the specific timeframe
(20)
Price (Budget)
(10)
EMPOWERMENT
 SMME
 Location
 Ownership
(10)
Total Scores
(100)
SCORING
REMARKS
INTERPRETATION OF THE RESULTS
 There has been significant improvement and progress made
since year 2002/3 to 2009/10 as evidenced by the following
movements : PBE’s moved from R15m in 2002/3 to R1057m in 2009/10.
 BBE’s moved from R207m in 2002/3 to R1798m in 2009/10.
 WBE’s moved from R15-38m in 2002/3 to R1007m in 2009/10.
 SMME’s moved from R207m in 2002/3 to R2298m in 2009/10.
 Local Businesses moved from R8-38m in 2002/3 to R2598m in
2009/10.
CATEGORIES OF PROCURED GOODS
AND SERVICES
 INFRASTRUCTURE SPEND
 Electricity: contractors and maintenance, Substation contract and switch gear, Electrical
accessories , Electrical cabling, lighting, Information technology, sewage,
 Water
 Engineering
 Housing
 Solid Waste
 Real Estate services
 MATERIALS MANAGEMENT BUYING
 Furniture, protective clothing, hardware supplies, stationery, catering (food and
beverages), logistics, education & training services, health & social services,
protective clothing, petroleum, business services and many more
BACKGROUND
BLACK ECONOMIC EMPOWERMENT (BEE)

Since 1994: BEE was a major thrust of all government policies YET there was no coherent strategy for
its implementation.

In 2000: BEE Commission released a report which gave the first attempt at broadly defining BEE.

The BEE Commission’s report laid a good foundation for the development of strategy towards the
implementation of BEE.

In 2003: a strategy for BEE was released which defined BEE as:

An integrated and coherent socio-economic process that directly contributes to the
economic transformation of the country and brings about significant increases in the
numbers of black people that manage, owned and control the country’s economy, as well as
significant decreases in income inequalities.

Thus the BEE process will include seven (7) elements of the scorecards: Ownership, Management
Control, Employment Equity, Skills Development, Preferential Procurement, Enterprise
Development as well as Socio-Economic Development.
KZN Provincial BEE STRATEGY
Vision:
A deracialized provincial economy in whose mainstream a critical mass of Black
people participate meaningfully, in terms of control and ownership of private sector
enterprises, and hold operational, professional, management, and executive positions in
organizations of both the private and public sectors, in proportion to their demographic
weight.
STRATEGIC GOALS ARE:
 Increase in the number of black people who have ownership and control of existing and
new enterprises ( in priority sectors).
 Increase number of Black people who hold senior management and executive positions
in enterprises.
 Increase in the proportion of the ownership and management of economic activities
vested in community-based and broad-based associations and enterprises, collective
enterprises, trade unions and employee trusts.
 Increase in the number of Black young people, particularly rural young people, who
acquire skills.
 Increase in land ownership by black people, etc.
HOW DOES SCM FACILITATE BEE
 Developing an Empowerment Charter which will Describe Specific Empowerment
Objectives for Different Types of Projects & Through Continued Enforcement of the
City’s Procurement Priorities which are :
 Increased Usage of Local Resources
 By Setting Minimum Targets for Usage of Local Labour and Businesses
 Redressing of Skewed Employment and Ownership patterns through Black Economic
Empowerment
 By Setting Minimum Targets for Broader Participation by Targeted Businesses through Packaging of
Contracts
 Enforcing Panel Contracts
 Creation of Opportunities for Job Creation and Poverty Alleviation and Stimulation of Skills
Development and Transfer
 By Targeting Certain Contracts for Compulsory Employment of the City’s Unemployed Youth and
Graduates/Skilled Labour through Learnerships and Apprenticeships



By Facilitating Incremental Implementing of EPWP
By Facilitating Incremental Usage of Co-ops
By Implementation of the Unit’s Trainee Program
HOW DOES SCM FACILITATE BEE….cont
 Creation of Opportunities for Job Creation and Poverty Alleviation and
Stimulation of Skills Development and Transfer
 By Targeting Certain Contracts for Compulsory Employment of the City’s Unemployed Youth
and Graduates/Skilled Labour through Learnerships and Apprenticeships



By Facilitating Incremental Implementing of EPWP
By Facilitating Incremental Usage of Co-ops
By Implementation of the Unit’s Trainee Program
 Fast-tracking the Growth and Ensuring Sustainability of SMME’s

By Ensuring Enterprise Development through Setting the Targets for SMME’s Participation

By Setting Minimum Requirement for Procurement of Goods and Services from SMME’s by
Successful Contractors
PRACTICAL CASE STUDIES
 Housing Projects
 Owners building own houses
 Skills development
 Stimulate Entrepreneurs
 Job Creation
PRACTICAL CASE STUDIES… cont
 SMME Development Projects through various vehicles
 Local procurement of all resources
 SMME Fairs
 Empowerment Workshops
 Business Support Centres : Hives, incubators
 Cooperative Development
 Indigent group
 Skills development and business linkages
 Expanded Public Works Programme (EPWP)
QUESTIONS AND ANSWERS
DISCUSSION