The viability of preferential procurement in the metals and engineering sector

Abstract

The objectives of this study were to evaluate the viability and sustainability of preferential procurement in the metals and engineering sector. Preferential procurement is one of the seven elements of Broad-Based-Black Economic Empowerment (BBBEE) and seeks to encourage companies to procure goods and services from black empowered suppliers. The Broad-Based-Black Economic Empowerment Act was legislated in 2004 as an improvement on the previous Black Economic Empowerment (BEE). The objective of these legislations was to increase participation of previously disadvantaged groups in the mainstream economy. BEE was deemed to be narrow because it focused exclusively on ownership and management control. BBBEE was enacted to broaden the number of beneficiaries and included five other elements, namely: Employment Equity, Skills Development, Preferential Procurement, Enterprise Development and Socio-economic Development. The two companies that engage in preferential procurement should benefit from the relationship and value should be created in the process. Companies should not procure from black suppliers for accumulating points on the generic scorecard. Black-owned suppliers should provide service and products of the highest quality standards that meet customer requirements. The questionnaire that reflects on the objectives of this study was drafted and circulated to black-owned suppliers for completion. The suppliers were asked to comment on statements that reflect on capacity, profitability, working relationship and continuity. The results show that the SMMEs have capacity to perform according to specification of customers. The area of concern was the difficulty for SMMEs to maintain the current preferential status. This is a risk that needs urgent attention. This needs further in-depth study and analysis.