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Budget Speech 2017

South Africa's growth and transformation

Public procurement


Honourable members, public procurement will amount to about R1.5 trillion over the next three years.


Let me say that a little differently. We will pay about R500 billion a year for the delivery of goods and services. Not transfers, or hand-outs, or cash distributions. The purpose is to acquire the infrastructure and operational inputs required for effective service delivery.


Public procurement is also an important strategic vehicle for developing local industries, broadening economic participation and creating work opportunities.


Last month we gazetted new preferential procurement regulations to achieve the following:

Where large firms are awarded tenders of R30 million or more, 30 per cent of the contract value must go to small or black-owned enterprises, where feasible.
Procurement authorities are now empowered to set clear targets to promote black- owned and women-owned businesses, participation of youth and disabled persons and opportunities for rural enterprises and co-operatives.
South African suppliers will enjoy preference in respect of goods with significant local content, thus supporting job creation.


Madam Speaker, there will be further procurement reforms this year. A draft Public Procurement Bill will be published shortly. It will establish a single procurement authority and will consolidate the currently fragmented regulatory environment, in keeping with section 217 of the Constitution.


The central supplier database is now fully operational. It has made doing business with the state much easier and cost effective. It enables government to know who it is doing business with and to use technology to reduce opportunities for fraud and corruption. Already, large numbers of transactions have been identified for further investigation:

Public service employees who appear to be doing business with the state,
Supply agreements that reflect the identity numbers of deceased persons,
Payments to bank accounts other than those of the relevant suppliers.


Madam Speaker, in some cases we will find that there are legitimate explanations. But where fraud or corruption is identified, action must be taken. Letsogo la molao ke le letelele. The law will catch up with you. Molato ga o bole…


The OCPO currently manages 71 transversal contracts covering over 23 000 items worth R61 billion. Good progress is being made to find better value for money while expanding and diversifying the number of suppliers.
Savings of R675 million in 2016/17 on cell phones and vehicle contracts. The vehicle contract alone is expected to save the state between R1 billion and R1.5 billion per year over the medium term.
In the property leasing sector, we expect savings of between R2 and R3 billion to be realised, while releasing resources for greater employment and contracting in building maintenance and services.
Collaborative efforts between SITA and National Treasury have led to savings of R2.5 billion over the next three years in the ten largest ICT equipment contracts.
Working with the Department of Basic Education on cost-effective standards for building design, we have reduced the average cost of new schools from R70 million for 7 500 square meters to R34 million.


I need to emphasise again that suppliers who have met their delivery obligations are entitled to payment within 30 days. We will continue to monitor progress in meeting this commitment.