The viability of preferential procurement in the metals and engineering sector / by L.L. Mokakala

The objectives of this study were to evaluate the viability and sustainability ofpreferential procurement in the metals and engineering sector. Preferentialprocurement is one of the seven elements of Broad–Based–Black EconomicEmpowerment (BBBEE) and seeks to encourage companies to procure goods andservices from black empowered suppliers.The Broad–Based–Black Economic Empowerment Act was legislated in 2004 as animprovement on the previous Black Economic Empowerment (BEE). Theobjective of these legislations was to increase participation of previouslydisadvantaged groups in the mainstream economy. BEE was deemed to benarrow because it focused exclusively on ownership and management control.BBBEE was enacted to broaden the number of beneficiaries and included fiveother elements, namely: Employment Equity, Skills Development, PreferentialProcurement, Enterprise Development and Socio–economic Development.The two companies that engage in preferential procurement should benefit fromthe relationship and value should be created in the process. Companies shouldnot procure from black suppliers for accumulating points on the genericscorecard. Black–owned suppliers should provide service and products of thehighest quality standards that meet customer requirements.The questionnaire that reflects on the objectives of this study was drafted andcirculated to black–owned suppliers for completion. The suppliers were asked tocomment on statements that reflect on capacity, profitability, workingrelationship and continuity. The results show that the SMMEs have capacity toperform according to specification of customers. The area of concern was the difficulty for SMMEs to maintain the current preferential status. This is a risk thatneeds urgent attention. This needs further in–depth study and analysis.